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Thoreau has preferences for consumption goods (C) and time spent on leisure (L). The utility function is u(C, L) = CL. The household also has a home production technology summarized by a production function. The production function produces consumption goods with labor (l) according to f(l) = 100√ l. Time spent on leisure and labor adds up to 24, L + l = 24. a) How much time will Thoreau spend in leisure? How many units of consumption good will he produce? b) Using the production function from part a), what is the marginal product of labor at the amount of labor in part a)? c) Now suppose that there is a competitive firm with the production function f(l) = 100√ l. The wage (w) is equal to the marginal product of labor from part b) and the price of output is 1. What is the profit maximizing demand for labor and amount of output? What is the profit? d) Let π be the profit from part c. Prices are also the same as in part c). Now suppose that Thoreau has decided to rejoin civilization. He now owns a firm with the production function f(l) = 100√ l and receives its profits. He can also provides some of his time to labor markets. His budget constraint is C + wL = 24w + π. How much leisure time and consumption goods will he provide. e) Now consider an economy that consist of 10 consumers that are identical to Thoreau who each own one firm like Thoreau's firm. Prices are the same as in part c). Show that both the labor market and the consumption good market clear at these prices. That is the sum of demand for leisure time from the consumers and demand for labor time from the firms equals the total hours which is 240. And the supply and demand for consumption goods are equal.
We draw any general conclusions about the relationship between market concentration on the one hand and price, profit, or total welfare on the other?
Design an economic policy solution to the problem. Analyze the economic theory used to complete the policy solution and determine the impact on the appropriate stakeholders.
It has been proposed that toll collection on the Massachusetts Turnpike, a key commuter route into Boston from the west, be discontinued. Proponents argue that tolls have long ago paid for the cost of building the road
peter higgins is a sales agent for xzy company. he has an effort cost function of c e2 and a reservation wage of 1500.
Read the case study - Bad News Memo or email: Reassuring Staff After Layoffs (From Dr. Guffy's case studies)
consider a perfectly competitive industry where each firm has an identical short run total cost curve given bytcq 100
1.Using detailed cash-flow information, a financial analyst claims to be able to spot companies that are likely candidates for bankruptcy. The analyst is presented with information on the past records of 15 companies and told that, in fact, 5 of thes..
The rent market price for a 1-bedroom condominium in NYC is $3,000. However, the government does not allow these prices to be charged and establishes a price ceiling.
choose and research an industry where there has been a pattern of change in a particular market model monopoly
Under what circumstances would a discriminating monopolist produce more socially optimal quantity than a nondiscriminating monopolist Is there any situation under which a discriminating monopolist could produce the quantity that would be produced ..
What would happen to the equilibrium price and quantity of lattes if the cost to produce steamed milk, which is used to make lattes, increased, and scientists discovered that lattes cause heart attacks? Will both the equilibrium price and quantity wo..
thoughts on Voice over Internet Protocol
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