Question

Multiple Choice: Justify Answer

4. Consider a married woman who engages in no market work. Her spouse spends 2 hours per day in home production and the rest of the day in market work. If family decisions are made by a benevolent decision maker, what effect will an increase in the woman’s wage have?

a. The woman and her spouse will each work in both the market and the home.

b. The woman will continue to work only at home.

c. The woman will only work if her wage increase gives her spouse a comparative advantage in the market.

d. The woman will only work if her wage increases above her spouse’s wage.

e. The woman will only work if her wage increase gives her a comparative advantage in the market.

Answer 1

Answer: e

She will work if there is comparative advantage in the market.

An example could be taken for understanding.

Table

	Home		Market
	Production	Opportunity cost	Production	Opportunity cost
Woman	10 units	15/10 = 1.5	15 units	10/15 = 0.67

Comparative advantage could only be availed if the opportunity cost is lower. Hence, 0.67 (in market) opportunity cost is lower than 1.5 (home); therefore, a wage increase should be entertained and she will go for working.