Reservation Wage: Mikes ex-wife is obligated to pay alimony. The alimony agreement states that her ex-wife must pay Mike the amount necessary to make his income at least $20 a day. If Mikes income is at or above $20, no alimony is paid. Currently, Mike's reservation wage, between working and not is $5.00, and his time endowment is 10 hrs/day.

a. Draw two budget constraints for Mike, one assuming a wage of $5.00 (his reservation wage) and one assuming a wage of $10.00.

b. Draw an indifference curve that indicates Mike's choice of leisure and consumption when the wage is $5.00, remembering that $5.00 is the reservation wage.

c. Would Mike work if his wage is $10.00? (pick one) Yes, No, Not enough information

d. Suppose Mike's wage is $5.00. Would Mike work if the alimony payment was set such that his income must be at least $30 instead of $20? (pick one) Yes, No, Not enough info