Suppose Jeris weekly utility function can be written as: U= CL 200L, where C is the amount of consumption (in $) and L is the hours of leisure she gets in a week. Based on this, we know her marginal rate of substitution (MU_L/MU_C) is equal to(C-200)/L. She can earn a wage of $20 per hour, has 100 hours a week available for labor and/or leisure, and has non-labor income of $400 per week.

a.Solve to find her optimal decision. How much leisure will Jeri want to take, how much will she want to work, and how much consumption spending will she have if she gets this outcome?

b. Suppose Jeri loses her source of non-labor income. Solve to determine what happens to her labor supply decision. Briefly discuss whether the predicted labor supply impact makes sense. Sketch the change. Your graph should include before and after the change.

c. Luckily, the change in part b was part of a dream. Suppose Jeri is back in the original situation from part a (V=$400). One day, Jeri is walking on Moscow Mountain and trips over a lamp. She picks up the lamp and a genie emerges, promising her the standard set of 3 wishes. First, Jeri wishes to be reunited with her beloved poodle, Gary. The genie agrees, but what appears before Jeri is a demonic shell of the Gary she once knew and loved. While sentient, the ghoulish creature seems to have no recollection of her or the life they once shared together. Disappointed, Jeri uses her second wish on world peace, which the genie successfully grants. Finally, Jeri wishes for the state of Idaho to update their overtime policies. Again, the genie grants the wish. The state of Idaho passes a law that workers must be paid double-time for every hour worked above 40 in each week. In her case, every hour above 40 hours worked in a week would earn her $40 per hour. Jeris increased opportunity for income takes the sting out of the failed reunion with Gary, which will haunt her until the end of her days.

Solve to determine how this change in policy affects Jeris labor supply decision. Discuss briefly whether these predictions make sense. (Note: solve with the new wage but pay attention to the potential income part of the budget constraint).

Use a labor/leisure diagram to demonstrate this change visually (show before and after). Label the key points. Your diagram should include indifference curves.

d. (3 points) Suppose that the company Jeri works for has a policy that allows workers to choose their own level of work, anywhere between 20 and 60 hours a week. Before the law change, Jeri chooses her optimal hours according to your answer from part a. They initially keep this policy after the overtime laws change, and she chooses her hours according to your answer in part c. However, after a year the company decides they can no longer afford this level of overtime. They now limit hours to 40 per week for each worker. Compare Jeris utility level in the 3 situations (original, overtime choice, 40-hour limit). Discuss how this state policy ultimately impacted Jeris labor supply and utility.