Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. Suppose there is a country with one household who cares only about consumption of a final good (cheese) and leisure. The household has h

image text in transcribedimage text in transcribedimage text in transcribed
2. Suppose there is a country with one household who cares only about consumption of a final good (cheese) and leisure. The household has h = 36 units of time which can be split between leisure and working in the cheese factory. The household receives a real wage equal to w for each unit of time it works in the cheese factory. The household receives dividends from its ownership of a firm equal to x. The household's preferences over consumption of cheese and leisure is given by the following utility function: u(C, () = In(C) + Be, where C > 0 denotes household consumption of cheese, 0 0 is a parameter. We will treat S as a parameter through most of this question. (This utility function violates one of our restrictions but we will use it anyway because it is a good form for computational purposes.) There is a single firm which produces cheese. The firm uses household labour and a fixed amount of capital (cows, milking machines, thermometer, cheese press, etc.) equal to K = 100 to produce cheese. The production function for producing cheese is given by Y = = (ND) 0.5 (K ) 0.5 We will treat z as a parameter throughout this question.(2.G.) (14 points) Draw a schematic PPF-Household Diagram to depict the qualitative effects of an increase in B on the equilibrium real wage, hours worked, leisure, and output.- To N = T w t B = - 25% 2 76 : 257 W ND = 2572 23 w* = 512. /B - Z 15 = 10 7 ( NO ) = 10Z ( 73 ) 0.5

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Human Resources In The Urban Economy

Authors: Mark Perlman

1st Edition

1317332474, 9781317332473

More Books

Students also viewed these Economics questions