a)Among ordered pairsO,P,Q, andR, identify the ordered pair that represent the optimal time allocation towards leisure and work when wages are set atw₀. Also, identify the ordered pair that represent the optimal time allocation towards leisure and work when wages are set atw₁. Briefly explain your answer. (5 points)

b)Which of the above wage levels is greater in nominal value:w₀orw₁? Briefly explain your answer. (5 points)

c)After being hired for a while underw₀, let us assume that her employer asks Kelly to work onlyh₁hours per week, which leaves her withL₁hours of leisure. How much should her employer pay Kelly to retain her at the firm:w₀,w₁,or an amount between those two wage levels? Briefly explain your answer. (10 points)

3. Consider Kelly, a randomly selected labor force. The following indifference curves and income constraints represent her preferences and income line, respectively. a) b) Income Hours of Leisure Hours of Work h, h 0 Among ordered pairs 0, P, Q, and R, identify the ordered pair that represent the optimal time allocation towards leisure and work when wages are set at We. Also, identify the ordered pair that represent the optimal time allocation towards leisure and work when wages are set at m. Briey explain your answer. (5 points) Which of the above wage levels is greater in nominal value: We or W]? Briey explain your answer. (5 points) After being hired for a while under We, let us assume that her employer asks Kelly to work only in hours per week, which leaves her with L; hours of leisure. How much should her employer pay Kelly to retain her at the firm: We, WI, or an amount between those two wage levels? Briefly explain your answer. (10 points)