Marilyn Is a Journalist

question 12

Essay

Marilyn is a journalist. She is considering two possible jobs. One job is as an editor for a magazine. The other job is writing freelance articles and selling them to whoever will buy them. If she works for the magazine, she must spend 10 hours a day at work and commuting. She will be paid $130 a day net of commuting costs and taxes if she takes this job. If she writes freelance articles, she can work at home and as many hours a day as she pleases. She estimates that she would earn $10 an hour after taxes if she does this. Her utility function is U = (R³)C, where R is the number of hours a day she spends not working or commuting and C is her earnings.
a. If Marilyn chooses to freelance, how many hours will she work?
b. Calculate her utility in each job and identify which job she will choose.

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Definitions:

Uncollectible Accounts

Receivables that are deemed to be uncollectable from debtors, leading to their recognition as a loss.

Credit Policy

Guidelines that define the credit limits and terms extended by a business to its customers.

Percentage of Receivables Basis

A method for estimating uncollectible accounts by applying a fixed percentage to the total receivables balance.

Cash Realizable Value

The amount of money that can be received from an asset when it is liquidated or sold.