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Suppose Mary has utility U = C+20L i.e. Mary gets the same utils from $20 of...

Suppose Mary has utility U = C+20L i.e. Mary gets the same utils from $20 of consumption or 1 hour of leisure. Further, assume that Mary can make $15/hour at her job and has absolutely no savings. Lastly… assume Mary must sleep 8 hours a day (which counts as neither work nor leisure), but can work and/or leisure up to the remaining 16 hours (with fractional hours of work / leisure allowed as well). Mary is trying to figure out how to spend her day.

  1. What is Mary’s optimal consumption of Labor and Leisure on this day?
  2. Mary has some luck with a scratch-off lotto ticket and now receives some free money. Suppose the lotto pays her $100 a day, even if she works. What is Mary’s optimal leisure and consumption now?
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