Question
Ray earns $40 per hour. He is endowed with 168 hours of time and $300 per week. His utility function over leisure and consumption is:
Ray earns $40 per hour. He is endowed with 168 hours of time and $300 per week. His utility function over leisure and consumption is: U(L,C) = L2C.
a. What is the value of Ray's endowment?
b. What is Ray's reservation wage?
c. What is Ray's optimal choice of leisure, hours of work and consumption?
d. Illustrate your solution in a diagram of his constraint and the indifference curve corresponding to his optimal choice.
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Managerial Economics Applications, Strategies and Tactics
Authors: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
13th edition
1285420926, 978-1285962399, 978-1285947853, 1285947851, 978-1285420929
