Identical preferences and identical wage rates

Assignment Help Business Economics

Reference no: EM131076346

PROBLEM 1

Two widows, Rosie and Ethel, have identical preferences, and identical wage rates. Rosie has no non-labor income but Ethel receives an income from her late husband's pension. Assuming that leisure is a normal good, who will work more hours? Use a graph to explain your answer.

PROBLEM 2

Suppose that Lesley’s utility function is given by u(I) = √10I (square root of 10I), where I = income in thousands of dollars.

Suppose that Lesley is currently earning an income of $40,000 and she can earn that income with certainty next year. She is offered a chance to take a new job that offers a .6 probability of earnings $44,000 and a .4 probability of earning $33,000. Given her utility function, should she take the new job? (That is, would taking the job be the optimal choice for her.)

Reference no: EM131076346

Questions Cloud

Illustrate how the fed can raise interest rates : In the mid 2000s, as house prices began to climb, some were concerned that an overheated housing market was leading to an unstable inflationary gap. As a result, beginning in the second half of 2004, the Federal Reserve (headed by Alan Greenspan at t..

Write a recursive preorder traversal method : Write a recursive preorder traversal method for this implementation.

Application for an interior surface coating facility : To finish our course project due in this Unit VIII, A Permit By Rule (PBR) Application for an Interior Surface Coating Facility, complete the final two sections, "Pollution Control Technologies" and "Process Flow Diagram" of your proposal by follo..

Characteristics of interview phases : Write a 1,400- to 2,100-word paper about information-giving responses and the characteristics of interview phases - Watch the "Emotionally Focused Couples Therapy" video found in this week's Electronic Reserve Readings.

Identical preferences and identical wage rates : Two widows, Rosie and Ethel, have identical preferences, and identical wage rates. Rosie has no non-labor income but Ethel receives an income from her late husband's pension. Assuming that leisure is a normal good, who will work more hours?

Human factors in maintenance : For research paper I, you must choose an airline or organization that has been affected by Human Factors in maintenance. Remember, not all human factors are related to maintenance faults.

What is sub game-perfect equilibrium for five-period game : Glassworks and Clearsmooth compete in the local market for windshield repairs. The market size (total available profits) is $10 million per year. Suppose the two windshield-repair firms know they will compete for just one year. Write down the payoff ..

Corporate governance and capitalization : Shareholder's Wealth Maximization linked to Corporate Governance and Capitalization. How does this affect and effect our nation - government, businesses, and individuals?

User Account

All Pages