Answer to Question #306424 in Macroeconomics for Zhiingg

Question

You and your partner are highly efficient people. You can earn $18 per hour in the workplace; your partner can earn $15 per hour. (a) What is the opportunity cost of one hour of leisure for you? (b) What is the opportunity cost of one hour of leisure for your partner? (c) Now consider what a PPF would look like: You can produce/consume two things, leisure and income. Since income buys things you can think of the PPF as having these two productsleisure and consumption goods/services. So, with leisure on the horizontal axis and income in dollars is on the vertical axis, plot your PPF. You can assume that you have 14 hours per day to allocate to either leisure or income. [Hint: the leisure axis will have an intercept of 14 hours. The income intercept will have a dollar value corresponding to where all hours are devoted to work.] (d) Draw the PPF for your partner.

Answer 1

(a) What is the opportunity cost of one hour of leisure for you?

Opportunity cost is the forgone benefit that would have been derived from an option not chosen.

Thus, the opportunity cost of one hour of leisure for you is: $18

(b) What is the opportunity cost of one hour of leisure for your partner?

Thus, the opportunity cost of one hour of leisure for your partner is: $15

(c) Now consider what a PPF would look like: You can produce/consume two things, leisure, and income. Since income buys things you can think of the PPF as having these two products leisure and consumption goods/services. So, with leisure on the horizontal axis and income in dollars is on the vertical axis, plot your PPF. You can assume that you have 14 hours per day to allocate to either leisure or income. [Hint: the leisure axis will have an intercept of 14 hours. The income intercept will have a dollar value corresponding to where all hours are devoted to work.] (d) Draw the PPF for your partner.

The PPF for your partner.