Donald and Hillary each have 10 hours of labor (L) that can be used to produce candy (C) and soup (S). Donald’s utility function is given by: U D = C^0.3 x S^0.7 and Hillary’s is: U H = C^0.5 x S^0.5 . Neither have preferences over production. Production of each good is determined by: C = 2(Lc) and S= 3(Ls). Lc is hours of labor spent on candy on Ls is hours of labor spent on soup. Need answer ASAP (a) What must the price ratio (pc/ps) be? (b) Set the wage equal to $1. Given the above price ratio, how much C and S will Donald and Hillary demand? (c) How should labor be allocated between the two goods to meet the demand calculated in part b)?
Donald and Hillary each have 10 hours of labor (L) that can be used to produce...
Problem 3 - Labor Market & Taxes PROBLEM 3: LABOR MARKET AND TAXES (20 POINTS) Suppose a worker has preferences over consumption and leisure that can be repre- sented by the following utility function: U = ln (C) + In (1) There are 16 hours per day available for leisure (1) and labor (L) (the remaining 8 hours are for sleeping). The hourly wage is w, and assume that the price of each unit of consumption is $1. The only...
Suppose that: In Malaysia the unit labor requirement (ULR) to produce a pound of rice and a pencil are 1 and 2 hours of labor respectively; In Indonesia, the unit labor requirement to produce a pound of rice and a pencil are 2 and 3 hours respectively; each country has 10,000 hours of labor to allocate between the production of rice and pencils; and in autarky, Malaysia consumes 5,000 pounds of rice and 2,500 pencils. When trade occurs, the world...
Imagine a country X that produces only two goods, strawberries (S) and cars (C), using two factors of production, capital (K) and labour (L). The production functions for both goods are given by : Qs = Qs(Ks , Ls) Qc = Qc(Kc , Lc) Qs is the total strawberry output, and Qc is the total car output. K and L are capital and labour inputs, respectively. Since it is difficult to pick strawberries by machines, we assume that strawberry production...
QUESTION 10 Acme Eggs produces eggs. Acme has estimated this production function for its eggs: Q = 10L".SK.) The marginal product of labor is given by MPL =5L-0.5 K.S and the marginal product of capital is given by MPx=520.5 -0.5 where Q = output measured in eggs, L = labor measured in person hours, and K = capital measured in machine hours. Acme currently pays a wage of $15 per hour and considers the relevant rental price for capital to...
There are 800 consumers in an economy that each have the same utility function given by U(c, l) = 32√ c − (24 − l)2 where c is their consumption and l is the number of hours they spend for leisure. A single firm serves the market with production function Y = 32L1/2K1/2 . The firm cannot choose its capital stock, which is fixed at K = 1600. You can assume the price level is equal to 1 so real...
Kirpa is trying to decide how many hours to work each week. Her utility is given by the following function: U(C,H) = C2 H3 , where C represents weekly consumption and H represents weekly leisure hours. Her marginal utility with respect to consumption is MUc = 2CH3 , and her marginal utility with respect to leisure is MUH = 3C2 H2 . A) Find Kirpa's optimal H, L and C when w=$7.50 and a = $185. B) Suppose w increases...
Labor and capital are used to produce an airline flight. The production function is given by f(L, k)minl,k). In words, it takes two workers (pilots) and one plane to produce a trip. Safety concerns require that every plane has two pilots (a) Describe the isoquant map for the production of air trips. (b) Explain why the cost per trip is 2w +r, where w is the wage and r is the price of capital. (c) Suppose that the company wants...
A worker's preferences over consumption (c) and leisure (l) can be represented by U(cl) = cl. The price of consumption is given by p = 1 and the wage by w=1 (a) Suppose we measure leisure in hours per day such that the maximum value I can take is 24. Let's represent hours worked by h; then we have h = 24-1. Write the Budget Constraint of this worker in terms of c and l. (b) Explain briefly why w/p...
cte 's production manager reports that the short-run Podinction relationship between the number of labor units that may be used 25. The s as tollowand the total product that maty be produced per period of time re Total Output 2 Labor Units 2 3 10 15 24 25 8 The wage rate per unit of iabor is $10.00, and the unit cost of raw material is $100, the total fixed cost is $5.00 and the firm needs one unit of...
1. Suppose that Alex must produce his own cereal, using inputs of raw materials obtained from his parent's food storage (S) and labor provided by Alex's cook- ing skills (L). Production of cereal is given by Fc(LS)-L0.5S0.5. Further. suppose Alex has a utility function Ua(ca,Ca) c505, where ca is his consump- tion of cereal and la is the amount of leisure he enjoys. He has no endowment of cereal, but is endowed with 120 hours of time (which can be...