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Shelly's preferences for consumption and leisure can be expressed as U(C, L) = (C - 100) (L - 40). This utility function implies that Shelly's marginal utility of leisure is C - 100 and her marginal utility of consumption is L - 40. There are 110 (non-sleeping) hours in the week available to split between work and leisure. Shelly earns $10 per hour after taxes. She also receives $320 worth of welfare benefits each week regardless of how much she works.
(a) Graph Shelly's budget line.
(b) What is Shelly's marginal rate of substitution when L = 100 and she is on her budget line?
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