Question 3.25 Choose the correct answerRead the following statements and select the one that is correct regarding hours of work and income.

Question

BlackTom AI · Accepted Answer

An hour of leisure costs the worker the foregone wage — the hourly wage.

1) Relevant knowledge points and concepts
- Opportunity cost: the value of the next-best alternative forgone. For a worker, one hour of leisure forgoes one hour of earnings, so its opportunity cost equals the wage (real wage when measured in purchasing power).
- Labor–leisure tradeoff and budget constraint: workers allocate time between work (earns wage) and leisure (no earnings). A change in the real wage rotates the budget line.
- Income and substitution effects: a higher real wage makes leisure relatively more expensive (substitution effect → more work), but also raises real income (income effect → possibly more leisure), so total hours worked can increase or decrease depending on which effect dominates.

2) Step-by-step reasoning
- By definition, choosing one extra hour of leisure means not working that hour and therefore not earning the hourly wage. Thus the “price” paid for that leisure hour is precisely the hourly wage (real wage if we account for prices).
- If the real wage increases, the opportunity cost of leisure increases: leisure becomes costlier in foregone earnings. That demonstrates option (a) is false.
- Because substitution and income effects move in opposite directions (substitution favors more work; income can favor more leisure), the net effect on hours worked is ambiguous. Therefore it is not true that an increase in the real wage always reduces hours (option c false) or that both effects always increase hours (option d false).

3) Intermediate steps / illustration
- No numeric calculation needed; logical deduction suffices: foregone earnings per hour = wage → price of leisure = wage.

4) Why the correct answer is correct
- Option (b) correctly identifies the opportunity cost: the hourly wage is the monetary “price” of an hour of free time.

5) Why other options are incorrect (brief)
- (a) False: a real wage increase does change the opportunity cost of leisure.
- (c) False: higher wages can reduce or increase hours depending on income vs substitution effects.
- (d) False: the income effect can reduce hours while the substitution effect increases them; they do not both always increase work.

6) Conclusion
Thus the correct choice is (b): "The 'price' of an hour of free time is the hourly wage rate." This matches the provided answer.

Question 3.25 Choose the correct answerRead the following statements and select the one that is correct regarding hours of work and income.单项选择题

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