Leandro has 16 hours per day that he can allocate to work or leisure. His job pays a wage rate of $20. Leandro decides to consume 8 hours of leisure. His indifference curves have the usual shape: they slope downward, they do not cross, and they have the characteristic convex shape. Draw Leandro's time allocation budget line for a typical day, with income on the vertical axis and hours of leisure on the horizontal axis. Then illustrate the indifference curve at his optimal choice. Based on the graph, choose the correct statement.
a. If Leandro chooses to consume 8 hours of leisure, then his income would be $320.
b. At his chosen bundle, Leandro will work for 8 hours, and his income would be $160.
c. The slope of the time allocation budget line is 20.
d. The opportunity cost of leisure is 20.

As the question states that Leandro spends 8 hours out of 16 hours in leisure time. If Leandro spends all the 16 hours in work he would earn (16 x $20) = $320.

I have attached the picture of the graph for understanding.

Answer Link

topeadeniran2 topeadeniran2 · Answer 2 · 2022-04-12T19:19:53+02:00

The graph indicates that the correct statement is D. The opportunity cost of leisure is 20.

What is opportunity cost?

The opportunity cost of a particular activity option is the loss of value or benefit that would be incurred by engaging in that activity.

On a typical day, maximum income or consumption Leonardo can have I =(16-L)20 where L= his leisure time and wage rate per hour =20.

In this case, to consume one hour of leisure Leonardo have to give up 20 dollars of income that he could have earned from working. Therefore, the opportunity cost of leisure is 20.

Learn more about opportunity cost on:

https://brainly.com/question/481029