Mike's utility function for consumption and leisure is U(C; L) = C1=2 L1=2. There are 168 hours in the week and he earns $10 per hour.
a) What is Mike's optimal amount of consumption, hours of work and of leisure?
b) If the government starts a welfare policy that pays B dollars to all non workers and pays $0 to all workers, at what value of B will Mike opt out of labor force in order to go on welfare?