Question

Leandro has 16 hours per day that he can allocate to work or leisure. His job pays a wage rate of $20. Leandro decides to consume 8 hours of leisure. His indifference curves have the usual shape: they slope downward, they do not cross, and they have the characteristic convex shape. Draw Leandro's time allocation budget line for a typical day, with income on the vertical axis and hours of leisure on the horizontal axis. Then illustrate the indifference curve at his optimal choice. Based on the graph, choose the correct statement.
a. If Leandro chooses to consume 8 hours of leisure, then his income would be $320.
b. At his chosen bundle, Leandro will work for 8 hours, and his income would be $160.
c. The slope of the time allocation budget line is 20.
d. The opportunity cost of leisure is 20.

Answer 1

Answer: A. If Leandro chooses to consume 8 hours of leisure, then his income would be $320

Explanation:

As the question states that Leandro spends 8 hours out of 16 hours in leisure time. If Leandro spends all the 16 hours in work he would earn (16 x $20) = $320.

I have attached the picture of the graph for understanding.