Consider the simple leisure model in which the individual chooses between leisure (L) and money income (M). The marginal utility

Question

3 years ago

8

of leisure (MUL) is 15 and the marginal utility of money (MUM) is 3. At the optimum, the wage rate:_______
a. $45
b. $0.20
c. $5
d. $15

1 answer:

tensa zangetsu [6.8K] · Answer 1 · 2022-06-18T01:17:30+03:00

Answer:

Wage rate is $5

Explanation:

The marginal utility of money=marginal utility of leisure/wage rate

When the formula is rearranged,wage rate is given thus:

wage rate=marginal utility of leisure/marginal utility of money

wage rate=15/3

wage rate =$5

In other words, the correct option is C,wage rate is $5

Option D would have been correct if the requirement was to calculate marinal utility of leisure