Question
the worker's utility function is c*l (dollars of consumption times leisure hours per week). The worker has 80 hour per week to devote to leisure
the worker's utility function is c*l (dollars of consumption times leisure hours per week). The worker has 80 hour per week to devote to leisure or work and earns a wage of $20 per hour. The worker has no nonlabor income.
1 Solve for the worker's optimal labor supply (h*) in hours per week.
2 Solve for the worker's optimal dollars of consumption per week
3 Solve for the worker's maximum utility
4 Suppose the same worker now can decide to continue working or collect benefits in a welfare program. The worker can receive $B maximum benefits from the welfare program, but only qualifies for welfare if he has zero income. At what value of B will the worker decide to quit working and opt to join the welfare program?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started