As the wage rate per hour increases, the opportunity cost of leisure ?
Correct answer: B. increases since the cost of forgoing one hour of work increases
- A. remains constant
- B. increases since the cost of forgoing one hour of work increases
- C. decreases since the customer now has more income to spend
- D. may increase of decrease depending on the individual's preferences.
Explanation
One hour of leisure means giving up one hour of wages, so a higher wage raises the opportunity cost of leisure. The income effect may influence the amount of leisure chosen, but it does not change this opportunity-cost relationship.
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