Raka has 80 hours per week that she can allocate to work or leisure. Her job pays a wage rate of $20 per hour, but Raka is being taxed on her income in the following way. On the first $400 that she makes, she pays no tax. That is, for the first 20 hours she works, her net wage—what she takes home after taxes—is $20 per hour. On all income above $400, Raka pays a 75% tax. That is, for all hours above the first 20 hours, her net wage rate is only $5 per hour. Her indifference curves conform to the usual assumptions about consumer preferences. Raka’s optimal choice is to work 30 hours. Draw Raka’s time-allocation budget line for a typical week.

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