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Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 100)...

Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 100)  (L – 40). This utility function implies that Shelly’s marginal utility of leisure is C – 100 and her marginal utility of consumption is L – 40. There are 110 (non-sleeping) hours in the week available to split between work and leisure. Shelly earns $10 per hour after taxes. She also receives $320 worth of welfare benefits each week regardless of how much she works.

(d) Find Shelly’s optimal amount of consumption and leisure.

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