Marilyn Is a Journalist

Marilyn is a journalist. She is considering two possible jobs. One job is as an editor for a magazine. The other job is writing freelance articles and selling them to whoever will buy them. If she works for the magazine, she must spend 10 hours a day at work and commuting. She will be paid $130 a day net of commuting costs and taxes if she takes this job. If she writes freelance articles, she can work at home and as many hours a day as she pleases. She estimates that she would earn $10 an hour after taxes if she does this. Her utility function is U = (R³)C, where R is the number of hours a day she spends not working or commuting and C is her earnings.
a. If Marilyn chooses to freelance, how many hours will she work?
b. Calculate her utility in each job and identify which job she will choose.

Correct Answer:

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a. 6 hours.
b. If she freelanc...

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