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 $20 per day and is paid a wage of $0 per hour, how many hours of leisure will he choose per day?

Question

Quizplus · Accepted Answer

Since Dudley earns no wage, his consumption is fixed at $20 per day. To maximize his utility, he should choose R to minimize the negative impact of the term (12 - R)^2. The minimum occurs when R = 12, as (12 - 12)^2 = 0.

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