1)

2)

You work for computer software company, out of a home office. You split the 24 hours in a day between work and leisure (L). For every hour of work, you earn a wage of $30. In addition to the money you earn from your job, you also have daily investment income of $100. You use your earnings to purchase consumption goods (c). The utility you get from leisure and consumption is given by: U = c1/3 L2/3. [Note: MRS = 2c = How many hours a day will you work? What will be your level of consumption? Illustrate your answer with a carefully labelled graph. [Builds from Q2(a)] Your employer asks you to start working out of the main office, which will involve commuting by subway for 3 hours every day. Subway tickets are free. However, you are not paid for commuting time, and commuting time is NOT considered leisure. Graph your new budget constraint, and label it carefully. (Hint: What is the largest amount of leisure you could take while still earning labour income?]