Question: Tom faces a labor supply decision. His well-behaved preferences over the two goods, L (leisure) and C (consumption) can be represented by u = 4L

Tom faces a labor supply decision. His well-behaved preferences over the two goods, L (leisure) and C (consumption) can be represented by

u = 4L + C. He can choose how many hours to work at the wage rate w per hour and has no non-labor income. The price per unit of consumption is p, and his total free time is T hours. In terms of parameters from the question, what is the most that he would be willing to pay to have an extra hour of free time? That is to increase T by 1. Why?

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