Dudley, has a utility function U(C, R)= C - (12 - R)², where R is leisure and C is consumption per day.He has 16 hours per day to divide between work and leisure.If Dudley has a nonlabor income of $30 per day and is paid a wage of $4 per hour, how many hours of leisure will he choose per day? A)9 B)7 C)8 D)11 E)10

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Quizplus · Accepted Answer

Dudley maximizes utility by setting the marginal utility of leisure equal to the wage rate. Solving for R in the equation 2(12-R) = 4 gives R = 10 hours of leisure.

Dudley, Has a Utility Function U(C, R)= C - (12