Evaluating a Claim about Opportunity Cost
An economic commentator makes the following claim: 'When a person receives a large, unexpected inheritance, the opportunity cost of their leisure time increases because they are now wealthier and can afford to place a higher value on their free time.' Evaluate this commentator's claim. Is their reasoning about the change in the opportunity cost of leisure correct within the standard economic model of labor-leisure choice? Explain your reasoning, focusing on what determines the opportunity cost in this model.
0
1
Tags
Science
Economy
CORE Econ
Social Science
Empirical Science
Economics
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
Evaluation in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
Unearned Income Triggers Only an Income Effect
Analyzing the Opportunity Cost of Leisure
An architect earns a wage of $75 per hour. They then win a one-time prize of $10,000 in a design competition. Considering only the immediate effect of this prize, what is the new opportunity cost for this architect to take one hour of leisure (e.g., an hour off work)?
A factory worker who earns $20 per hour receives a one-time, unexpected bonus of $500. As a direct result of this bonus, the amount of income they give up by taking an hour off work has now increased.
Impact of Non-Labor Income on Opportunity Cost
Impact of Non-Labor Income on Opportunity Cost
An individual's daily trade-off between leisure and consumption is represented by a budget constraint line on a graph, with 'Hours of Leisure' on the horizontal axis and 'Consumption ($)' on the vertical axis. The slope of this line is determined by their hourly wage. If this individual receives a large, one-time cash gift, how will their budget constraint line change?
An individual's opportunity cost of free time is the amount of consumption they give up for an additional hour of leisure. For each scenario below, match it with the correct effect on this opportunity cost.
Evaluating a Claim about Opportunity Cost
Evaluating a Claim about Opportunity Cost
A freelance consultant charges $150 per hour for their services. They also receive a one-time government tax rebate of $600. The opportunity cost for this consultant to take one hour of leisure is $____.