1. Ozzie earns $30/hour and can produce $10 worth of household commodities with an hour of time. Harriett earns $20/hour and can produce $30 worth of home commodities with an hour of time. They are each endowed with 10 hours.

a. Draw Ozzie's opportunity frontier if he remains single.

b. Draw Harriett's opportunity frontier if she remains single.

c. Draw Ozzie and Harriett's combined frontier if they marry and engage in specialization and exchange.

Indicate the values of home and market goods at each of the two intercepts and any kinks, and indicate the slopes of each segment.

d. Indicate the points along the frontier at which:

i.) Ozzie spends all his time in the market, and Harriett spends all her time in home production

ii.) Harriett spends all her time in the market, and Ozzie spends all his time in home production

iii.) Ozzie spends all his time in the market, and Harriett spends some time in the market and some time at home.

iv.) Harriett spends all her time in the market, and Ozzie spends some time in the market and some time at home.

v.) Ozzie spends all his time in at home, and Harriett spends some time in the market and some time at home.

vi.) Harriett spends all her time at home, and Ozzie spends some time in the market and some time at home.

vii.) Ozzie and Harriett spend all their time in the labor market

viii.) Ozzie and Harriett spend all their time at home.

Which of the points won't exist along the frontier?

2. Ted earns $ 25 per hour and receives an allowance of $100 per week. His utility function over leisure and consumption is:

U(L, C) = LC²

a. Draw his budget constraint. Indicate the values of H, L and C at each intercept and kink. Indicate the slope of the budget constraint along each segment.

b. What is Ted's optimal choice of leisure, consumption and hours worked?

c. What is his reservation wage?

d. On the diagram from part (a) illustrate the indifference curve corresponding to Ted's optimal choice.

e. Draw his budget constraint if his labor earnings over $2000 are taxed at arate of 20 % but there is no tax on his labor earnings under $2000 and no tax on his allowance. (10)

3. Zelda is endowed with 8760 hours of time every year. She earns $50 per hour as a home appraiser and she receives $20,000 per year from a family trust.

a. Draw her budget constraint.

b.Suppose that if Zelda works at all in a year she needs to pay $12,000 to renew her license. Draw her budget constraint.