If the current wage rate results in a budget constraint of AB1, the individual will choose:

If the current wage rate results in a budget constraint of AB1, the individual will choose:

Questions 31 – 35 are based on the following diagram:

B

2

B

1

Income

0 C D E A Leisure

31. If the current wage rate results in a budget constraint of AB1, the individual will choose:

a. 0C hours of work and AC hours of leisure

b. AD hours of work and 0D hours of leisure

c. 0D hours of work and AD hours of leisure

d. AC hours of work and 0C hours of leisure

32. The shift from budget line AB1 to AB2 implies a(n):

a. decrease in the wage rate c. increase in the wage rate

b. decrease in non-wage income d. increase in non-wage income

33. The equilibrium positions shown imply that in the relevant wage range, this person is:

a. on the upsloping segment of the individual labor supply curve

b. on the backward-bending segment of the individual labor supply curve

c. at the point on the individual labor supply curve where the income and substitution effects are equal

d. being offered a wage less than the reservation wage