6 2. (1) Budget line 1: Wages are $12 per hour. No income tax. Draw budget line 1.(ii)Budget line 2: Wages are $24 per hour. Draw budget line 2.(iii) Budget Line 3: Wages are $12 per hour. Non labor income also is received at $300 per week. No income tax. Draw budget line 3.(iv) Utility (c,r)=c3,5 Solve this worker's optimal labor-leisure choice, for budget line 1, budget line 2 and budget line 3. Label the optimalpoints on the diagram, with the solved numbers, and draw the Cobb-Douglas indifference curves.

Utility maximizing condition is MUr / w = MUcWhere MUr = Marginal utility from leisure,w = Wage…

2. () Budget line 1: Wages are $12 per hour. No income tax. Draw budget line 1. (ii) Budget line 2: Wages are $24 per hour. Draw budget line 2. (iii) Budget Line 3: Wages are $12 per hour. Non labor income also is received at $300 per week. No income tax. Draw budget line 3. (iv) Utility (c.r) -3,5 Solve this worker's optimal labor-leisure choice, for budget line 1, budget line 2 and budget line 3. Label the optimal points on the diagram, with the solved numbers, and draw the Cobb-Douglas indifference curves.

2. () Budget line 1: Wages are $12 per hour. No income tax. Draw budget line 1. (ii) Budget line 2: Wages are $24 per hour. Draw budget line 2. (iii) Budget Line 3: Wages are $12 per hour. Non labor income also is received at $300 per week. No income tax. Draw budget line 3. (iv) Utility (c.r) -3,5 Solve this worker's optimal labor-leisure choice, for budget line 1, budget line 2 and budget line 3. Label the optimal points on the diagram, with the solved numbers, and draw the Cobb-Douglas indifference curves.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 11PA

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