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Suppose you are given the utility function U(C, l) = lnC + 2L, where C = consumption and 0.4 0.6 L = leisure, and the
- Suppose you are given the utility function U(C, l) = lnC + 2L, where C = consumption and
- 0.4 0.6 L = leisure, and the production function Y = zK N .
- Assume that all output is consumed (Y = C), and that hours of leisure/work are normalized as representing fractions of a day (or equivalently, a value of 1 represents 24 hours).
- Suppose z = 1 and K = 20.
- a) What are the Pareto-optimal hours of work? b) What are the Pareto-optimal hours of leisure?
- Given the efficiency wage function: e(w) = w - 18w + 96w . What is the optimal wage
- that the firm should set?
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