Question 5 (15 points)Section B: 2. Jesse has 120 hours per week to divide between leisure, R, and work. When she works, Jesse earns $36 per hour. She values both leisure and consumption, C, according to the utility function U(R.C)=Minf18R: Cl. The price of the consumption good is unity.

a. Derive Jesse's optimal bundle. How much does she work?

b. Explain using a diagram how Jesse's allocation of time between work and leisure changes if she is taxed proportionately on her earnings at the rate of 25%. (Assume that her wage decreases by the full amount of the tax)

c. Starting from the solution to part (a), assume Jesse's boss tells her that new rules mean she must work 48 hours per week. Calculate Jesse's utility level under the new rules and show that she is worse off because of the new rules.

Question 5 {15 points) Section B: 2. Jesse has 120 hours per week to divide between leisure. R, and work. When she works. Jesse earns $36 per hour. She values both leisure and consumption. C, according to the utility function UlR,C]=Min{18R ; C}. The price of the consumption good is unity. a. Derive Jesse's optimal bundle. How much does she work? b. Explain using a diagram how Jesse's allocation of time between work and leisure changes if she is taxed proportionatelyr on her earnings at the rate of 25%. {Assume that her wage decreases by the full amount of the tax) c. Starting from the solution to part {a}. assume Jesse's boss tells her that new rules mean she must work 48 hours per week. Calculate Jesse's utilitv level under the new rules and show that she is worse off because of the new rules