Julia is a young widow with a baby in her care. The widow's pension brings her 588 uros a month, but it is not enough to cover the costs of child support, rent and monthly bills. She is therefore assessing the possibility of accepting a job at 5 euros an hour (subject to a 15% tax) for the number of hours obtained according to her utility function U(h,R)=h2-R. He also knows that if he accepts the job he will have to pay for a day-care centre for his child, which he estimates at 1 euro per working hour. It is requested:

a) What is your optimal combination of working and leisure time if you decide to work?

b)What will be the total daily income that Julia will receive? Hints: You need to calculate the hourly wage net of tax and childcare costs. The widow's pension is compatible with the personal earned income).

Answer rating: 100% (QA)

a The optimal combination of working and leisure time would be to work 8 hours and have 16 hours of ... View the full answer