Question

Suppose an employer wants a worker to work overtime. At the regular wage rate, the optimal...

Suppose an employer wants a worker to work overtime. At the regular wage rate, the optimal choice of hours of work for a worker is exactly the full-time work. Show the optimal choice in an income-leisure diagram, and show how the worker's choice would change for

(a) the double wage rate for every hour worked;

(b) the double wage rate for overtime hours only (i.e., up to full time, the worker is paid w, and for every hour above the full time, the worker is paid 2w).

Then explain, based on your diagram, why doubling the wage rate for every hour worked (not just over time) does not guarantee that the worker would agree to work overtime.

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