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Comparing Work Incentives and Opportunity Cost
Imagine two individuals, Alex and Ben. Alex has a job with a constant hourly wage. Ben is a self-employed artisan whose productivity declines the longer he works; his first hour is very productive, but each subsequent hour yields less output. Both individuals face a trade-off between their free time and their final output or income.
Analyze how the opportunity cost of taking an additional hour of free time differs for Alex and Ben as they work more hours. In your analysis, explain whose incentive to work an extra hour diminishes more rapidly and why, relating your explanation to the shape of their respective feasible frontiers.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.3 Doing the best you can: Scarcity, wellbeing, and working hours - The Economy 2.0 Microeconomics @ CORE Econ
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