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Consider a 1 period economy (static problem) with consumers, government and rms. As sume twice continuously differentiable, quasiconcave utility function and concave production function with
Consider a 1 period economy (static problem) with consumers, government and rms. As sume twice continuously differentiable, quasiconcave utility function and concave production function with constant returns to scale. The consumer derives utility from consuming the consumption good c and from having l hours of leisure. She receives real wage w for each of the 71. hours she works; she also receives rms' real dividends D (this is income she takes as given). The government raises revenue through lump sum taxes 15 charged to consumers, in order to nance government expenditure 9. The rms use a production function F that depends on current capital k and labor 7:.\" inputs. a. Write down and solve the consumer's Optimality problem (what does the consumer Op timize and under which constraint(s)?) Take rst order conditions and derive the con sumer's optimality conditions
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