Tom earns $15 per hour for up to 40 hours of work each week. He is paid $30 per hour for every hour in excess of 40. Tom faces a 20% income tax rate and pays $4 per hour in child care expenses for each hour he works. Tom receives $80 in child support payments each week. There are 168 hours in a week.

a. What is Tom's net hourly wage for the first 40 hours she works in a week?

b. What is Tom's net hourly wage for the hours she works beyond 40 hours in a week?

c. What is Tom's weekly total income if she works 40 hours a week?

d. Using the labor/leisure model, draw Anne's budget constraint. What happens to the budget constraint after 40 hours of work?

e. Using a graph explains the substitution and income effect of a wage increase in detail. State all the assumptions. In your graph is labor supply greater or smaller after the wage increase? Explain why.