DrJ Has 80 Hours Per Week to Divide Between Work

Dr.J has 80 hours per week to divide between work and leisure.His wage rate if $5 per hour.Dr.J receives a lump sum payment of $250 per week.Suppose that the first $50 per week of his labor income is untaxed, but all labor income above $50 is taxed at a rate of 10%.

A) The slope of Dr.J's budget line is everywhere -4.50.
B) Dr.J's budget line has a kink where his income is $300 and his leisure is 70 hours.
C) Dr.J's budget line has no kinks in the part of it that corresponds to a positive labor supply.
D) Dr.J's budget line has a kink in it at the point where he takes 80 units of leisure.
E) Dr.J's budget line has a piece that is a horizontal straight line.

Correct Answer:

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