Question

Lauren does not work and receives $500 per week in dividends and interest from her vast financial empire. She is just as happy if she works one hour per week to raise her income to $520, or works two hours per week to raise her income to $544, or works three hours per week to raise her income to $572, or works four hours per week to raise her income to $604, as she is when she does not work at all. ANSWER FOLLOWING QUESTIONS WITH GRAPHICAL ANALYSIS, NO EXCEL.

Suppose you offered Lauren’s a job at $18.00 per hour. Would he take it?

Answer 1

Lauren receives $500 per week as a non-labor income.

he is indifferent in these five outcomes:

• when he works 1 hour per week to raise his income to $520 ( $20 for 1 hour)
• or he works 2 hours per week to raise his income to $544, ($44 for 2 hours)
• or he works 3 hours per week to raise his income to $572, ($72 for 3 hours)
• or he works 4 hours per week to raise his income to $604, ($104 for 4 hours)

she does not take this job because  $18 per hour is below her reservation wage