Mr.Cog has 18 hours per day to divide between labor and leisure.His utility function is U(C, R)= CR, where C is dollars per year spent on consumption and R is hours of leisure.If he has a nonlabor income of 32 dollars per day and a wage rate of 13 dollars per hour, he will choose a combination of labor and leisure that allows him to spend
A)133 dollars per day on consumption.
B)149 dollars per day on consumption.
C)266 dollars per day on consumption.
D)123 dollars per day on consumption.
E)199.50 dollars per day on consumption.

Question

Quizplus · Accepted Answer

Given Mr. Cog has 18 hours per day to divide between labor and leisure, and his nonlabor income is 32 dollars per day with a wage rate of 13 dollars per hour, we calculate his maximum earning potential by multiplying the wage rate by the maximum hours he can work (18 hours). However, since he needs to allocate time for leisure to maximize his utility, we need to find the optimal balance without specific details on his utility maximization preferences. Assuming he works all 18 hours, he would earn 18 * 13 = 234 dollars from labor. Adding his nonlabor income of 32 dollars gives a total of 266 dollars per day. However, this scenario doesn't account for leisure time, which is a part of his utility function. Without explicit details on how he values leisure versus labor, we cannot accurately determine his optimal consumption spending. The correct answer must be inferred based on the information provided, which does not allow for a precise calculation of his consumption spending with respect to his leisure time. Therefore, the assumption that he allocates all his time to labor for maximum earning (and thus maximum spending) is incorrect, making the provided options speculative in the context of utility maximization.

MrCog Has 18 Hours Per Day to Divide Between Labor