Scenario: This problem applies the principle of optimization covered in Chapter 5 to the problem of choosing how many hours to work. Paul has to decide how many hours to work per day. His boss is willing to give Paul whatever hours Paul wants up to 8 hours. All else being equal, he would rather not work, that is, Paul has positive marginal benefit from each hour of leisure. But he is an avid collector of presidential campaign buttons. The more leisure he takes, the fewer buttons he can afford. So Paul faces a trade-off between leisure and buttons. Each button costs $1.00. The table below shows Paul's marginal benefits from leisure (MBlₑᵢsᵤᵣₑ) and buttons (MBbᵤttₒn).

-Refer to the scenario above.If the hourly wage is $1.00,how many hours would Paul choose to work? How many buttons would he buy?

Question

Scenario: This problem applies the principle of optimization covered in Chapter 5 to the problem of choosing how many hours to work. Paul has to decide how many hours to work per day. His boss is willing to give Paul whatever hours Paul wants up to 8 hours. All else being equal, he would rather not work, that is, Paul has positive marginal benefit from each hour of leisure. But he is an avid collector of presidential campaign buttons. The more leisure he takes, the fewer buttons he can afford. So Paul faces a trade-off between leisure and buttons. Each button costs $1.00. The table below shows Paul's marginal benefits from leisure (MBlₑᵢsᵤᵣₑ) and buttons (MBbᵤttₒn).
 
-Refer to the scenario above.If the hourly wage is $1.00,how many hours would Paul choose to work? How many buttons would he buy?

Quizplus · Accepted Answer

Paul would choose to work 6 hours because, at an hourly wage of $1.00, working 6 hours maximizes his utility given the trade-off between leisure and consumption. With $6 earned, he would buy 6 buttons, assuming each button costs $1.

Scenario: This Problem Applies the Principle of Optimization Covered in Chapter