Jack Earns 5 Dollars Per Hour

Jack earns 5 dollars per hour. He has 100 hours per week which he can use for either labor or leisure. The government institutes a plan in which each worker receives a $100 grant from the government but has to pay 50% of his or her labor income in taxes. If Jack's utility function is U(c, r) = cr, where c is dollars worth of consumption of goods and r is hours of leisure per week, how many hours per week will Jack choose to work?

A) 30
B) 40
C) 26
D) 20
E) None of the above.

Correct Answer:

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