A student has a feasible frontier representing the trade-off between hours of free time per day and money for consumption, which is earned by working. If the student's hourly wage rate increases, how does this affect the trade-off they face along their new feasible frontier?

Interpreting a Trade-Off

Interpreting the Feasible Frontier's Slope

A person faces a trade-off between daily hours of free time and money for consumption, which is earned by working at a constant hourly rate. Match each statement below to the economic concept it best represents in this context.

Consider an individual's trade-off between daily free time and consumption, where consumption is funded by working at a constant hourly wage. In this scenario, the 'opportunity cost' of one additional hour of free time refers to the consumption that must be given up, whereas the 'marginal rate of transformation' refers to the rate at which that hour of free time could have been converted into consumption. Therefore, these two concepts represent different quantitative values on the feasible frontier.

Analyzing Trade-Off Perspectives

An individual works at a constant hourly wage of $25. This person's feasible set shows the possible combinations of daily free time and consumption goods they can afford. For this individual, the opportunity cost of taking one additional hour of free time is a loss of$____ in consumption.

Analyzing a Non-Linear Trade-Off

An individual faces a trade-off between daily free time and consumption, earning a constant hourly wage. At their current position on the feasible frontier, the slope is -15. Which option correctly describes this situation from the two distinct perspectives of opportunity cost and the marginal rate of transformation (MRT)?

Critiquing an Economic Claim