A worker views leisure and income as “goods” and has an opportunity to work at an hourly wage of $10 per hour.
a. Illustrate the worker’s opportunity set in a given 24-hour period.
b. Suppose the worker is always willing to give up $12 dollars of income for each hour of leisure. Do her preferences exhibit a diminishing marginal rate of substitution? How many hours per day will she choose to work?

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November 15, 2011

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