a peak at 12 hours per day. If Michelle values only earnings, her indifference curves would be
horizontal and she would choose to work 12 hours a day where the profit curve reaches a peak at point
a
. Now suppose that her utility is a function of her earnings and how hard she has to work so that her
indifference curves between profit and leisure have the usual shape. Show that Michelle chooses a
point
b
on the profit constraint where she works fewer than 12 hours a day. Under pressure from the
government, the board cuts her profit incentive to one-fourth of her original incentive. To make sure
that she can earn as much as before, the board also gives her a salary that is large enough that her
salary
+
¼ profit
curve goes through point
b
. Show whether Michelle now works more or fewer hours
than at point
b
.

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