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Mike optimal amount of consumption

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Reference no: EM131381409

Mike's utility function for consumption and leisure is U(C; L) = C1=2 L1=2. There are 168 hours in the week and he earns $10 per hour.

a) What is Mike's optimal amount of consumption, hours of work and of leisure?

b) If the government starts a welfare policy that pays B dollars to all non workers and pays $0 to all workers, at what value of B will Mike opt out of labor force in order to go on welfare?

Reference no: EM131381409

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