Question

1. 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?
   1. The woman and her spouse will each work in both the market and the home.
   2. The woman will continue to work only at home.
   3. The woman will only work if her wage increase gives her spouse a comparative advantage in the market.
   4. The woman will only work if her wage increases above her spouse’s wage.
   5. The woman will only work if her wage increase gives her a comparative advantage in the market.

Answer 1

The correct answer is: e)

Reason: since the woman now works only at home, she will engage into market only if her wage increase gives her a comparative advantage in the market so that her opportunity cost of working at home increases.

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