Review Questions

1.
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Define an indifference curve. Explain why indifference curves are convex and do not cross.
2.
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What is the marginal rate of substitution (MRS) of consumption for leisure?
3.
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Define an individual's budget constraint. What is the constraint, given the hourly wage is W, the individual's wealth is A0, and he works for h hours?
4.
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What is a normal good?
5.
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If an individual participates in the labor force, then what condition governs his or her optimal consumption-leisure choice?
6.
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Outline the meaning of the income and substitution effects.
7.
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Over the last 70 years, what happened in the United States to (a) the length of the average workweek and (b) the male and female participation rates?

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