Question

Consider an economy in which the representative consumer preferences are described by U(C, l) = 0.9...

Consider an economy in which the representative consumer preferences are described by U(C, l) = 0.9 ln(C) + 0.1 ln(l). The total number of hours available to the representative consumer is h = 1, and the market real wage is w. The representative firm produces the final consumption good using the technology function Y = zN where N is the labour, and z = 2. Assume the government sets the level of its spending to G = 0.75 which has to be financed through a proportional tax t.

1. Given the linear specification of the production function, what will be the equilibrium wage w ? . [03 points]

2. Find the Competitive Equilibrium allocation (t ? , l ? , N? , Y ? ). [07 points]

3. Find the the Pareto Optimal Allocation by solving the social planner’s problem. [07 points]

4. What do you conclude? [03 points]

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose the representative consumer’s preferences are given by the utility function, U(C, l) = aln C...
Suppose the representative consumer’s preferences are given by the utility function, U(C, l) = aln C + (1- a) ln l Where C is consumption and l is leisure, with a utility function that is increasing both the arguments and strictly quiescence, and twice differentiable. Question: The total quantity of time available to the consumer is h. The consumer earns w real wage from working in the market, receives endowment π from his/her parents, and pays the T lump-sum tax...
A representative consumer has preferences described by the utility function:u(c) = lnc,wherecdenotes consumption. Assume that the...
A representative consumer has preferences described by the utility function:u(c) = lnc,wherecdenotes consumption. Assume that the total number of hours available to theworker are ̄h= 1. The consumer/worker receives the wage,w, for her labor services.A. Obtain the labor supply curve.B. Introduce a proportional tax on labor income,τw. Obtain the new labor supply curve.C. Introduce a proportional tax on consumption,τc. Obtain the new labor supply curve
1. Consider the representative consumer’s problem as follows. The representative consumer maximizes utility by choosing the...
1. Consider the representative consumer’s problem as follows. The representative consumer maximizes utility by choosing the amount of consumption good C and the amount of leisure l . The consumer has h units of time available for leisure l and for working Ns , that is, h = l+Ns . Government imposes a proportional tax on the consumer’s wage income. The consumer’s after-tax wage income is then (1−t )w(h −l ), where 0 < t < 1 is the tax...
Consider a consumer who has preferences over consumption (x) and leisure (L) represented by u(L, x)...
Consider a consumer who has preferences over consumption (x) and leisure (L) represented by u(L, x) = 10 ln L + 5 ln x. The consumer has 24 hours in the day (T = 24) to divide between work and leisure. The consumer can choose however many hours they want to work. For each hour of work they are paid a wage given by w = 10. Consumption (x) costs 1 per unit. (a) Initially suppose that the consumer has...
Assume the representative consumer lives in two periods and his preferences can be described by the...
Assume the representative consumer lives in two periods and his preferences can be described by the utility function U(c,c′)=c1/3 +β(c′)1/3, where c is the current consumption, c′ is next period consumption, and β = 0.95. Let’s assume that the consumer can borrow or lend at the interest rate r = 10%. The consumer receives an income y = 100 in the current period and y′ = 110 in the next period. The government wants to spend G = 30 in...
A representative consumer living in a Country A values consuming goods (C) and enjoys leisure (l)....
A representative consumer living in a Country A values consuming goods (C) and enjoys leisure (l). The consumer has h = 1 units of time to divide between working and enjoying leisure. For each hour worked, he receives w = 1.5 units of the consumption good. The consumer also owns shares in a factory which gives him an additional π = 0.55 units of income. The government in this economy taxes the consumer and uses the proceeds to buy consumption...
Consider the following labour-leisure choice model. U(C,L) = C^(2/3)L^(1/3) C = wN + π – T...
Consider the following labour-leisure choice model. U(C,L) = C^(2/3)L^(1/3) C = wN + π – T H= N+ L Where C: consumption L: leisure N: hours worked H = 50 : total hours w = 4 : hourly wage π = 20 : non-labor income T = 10 : lump-sum tax Suppose the hourly wage changes to w = 5. Perform a decomposition and calculate the substitution, income and total effect for each C, L, N
Consider a one-period closed economy, i.e. agents (consumers, firms and government) live for one period, consumers...
Consider a one-period closed economy, i.e. agents (consumers, firms and government) live for one period, consumers supply labor and demand consumption good, whereas their utility function is in the form of log(C−χN1+ν/1+ν ) (GHH preference). Firms supply consumption good and demand labor and their production function is y = zN^1−α. The government finances an exogenous spending via lump-sum taxes. Suppose there is a positive shock on χ which means the consumers favor leisure (or dislike labor) by much more than...
Consider the following competetive economy K=150 L=150 Production Function= Y=K^.4L^.6 Consumption Function . C=10+.7Yd I= 40-100R,...
Consider the following competetive economy K=150 L=150 Production Function= Y=K^.4L^.6 Consumption Function . C=10+.7Yd I= 40-100R, G=30, T=30 .... MPL= .6K^.4L^-.4 MPK= .4K ^-.6L^.6 Find competetive EQM by leaving out goods market in your initial computations. a) Calculate disposable income (Yd), C, Private Savings then use this information to determine the Gov Savings and National Savings b) Use national savings (S) and the investment function (I) to determine the real interest rate (r). Draw the graph of the Loanable Funds...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT