) 2. Utility maximization - Trading off labor and leisure The indifference curves on the following graph show Dina's preferences for leisure and consumption for increasing levels of utility, such that her utility Increases in both consumption and leisure. Assuming that Dina spends 68 hours each week sleeping, she has a maximum of 100 hours available to her for leisure if she does not work at all. Initially, she works 50 hours (and thus has 50 hours of leisure) and earns $400 per week. Use the grey point (star symbol) to indicate Dina's initial leisure/consumption bundle. Dashed drop lines will automatically extend to both axes. CONSUMPTION (Dollars per week) 1000 900 800 700 600 500 400 300 200 100 0 D 50 60 70 80 90 100 116 LEISURE (Hours per week) 10 20 30 40 +| Intial bundle $350 Unemployment Benefits Equivalent Bundle $200 Unemployment Benefits Equivalent Bunde Now, suppose that Dina is laid off, but she is eligible to collect unemployment benefits of $350 per week. Use the black point (cross symbol) to represent Dina's unemployment point on the previous graph when she consumes $350 per week and has 100 hours of leisure. vrne previous you morandum of mon VANILA (o amor paupy hours of leisure. Suppose that after a month of being unemployed, Dina's friend Charles suggests that she apply for a job at his company, where she could earn her previous salary again by working 50 hours per week. True or False: Because Dina is on a higher indifference curve while receiving unemployment benefits than she was when she was employed, she would be better off working at her friend's company than she is remaining unemployed. O True O False On the previous graph, use the green point (triangle symbol) to indicate the minimum weekly salary (an equivalent bundle) that would make Dina as well off working 50 hours per week as she is when unemployed and collecting $350 in benefits. 7 Now, suppose that the government enacts reforms that reduce unemployment compensation to $200 per week for Dina. On the previous graph, use the orange point (square symbol) to represent Dina's new leisure/consumption bundle when she consumes $200 per week and has 100 hours of leisure. Then use the blue point (circle symbol) to indicate the minimum weekly salary (an equivalent bundle) that would make Dina as well off working 50 hours per week as she is when unemployed and collecting only $200 in benefits. Complete the following table by entering the minimum weekly salary that would make Dina as well off working 50 hours per week as she is when unemployed and collecting the unemployment benefits listed in the following table. Equivalent Bundle Salary Unemployment Benefits (Dollars per week) (Dollars per week) less 350.00 200.00 more The decrease in unemployment benefits makes Dina likely to accept a job; therefore, based on this example, you would expect that a decrease in benefits would cause workers who are currectly collecting unemployment benefits to accept job offers