Katie’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 80) x (L – 40) This utility function implies that Katie’s marginal utility of leisure is C – 80 and her marginal utility of consumption is L – 40. There are 110 hours in the week available to split between work and leisure. Katie earns $15 per hour after taxes. She also receives $200 worth of assistance benefits each week regardless of how much she works. Graph Katie’s budget line. What is Katie’s marginal rate of substitution when L = 70 and she is on her budget line? What is Katie’s reservation wage?

Q: Which of the following statements is true? Select one or more options: -If two different…

A: The following statements are true -   If two different individuals have exactly the same budget…

Q: If your income is $60 and the prices of product A and product B are $4 and $3, respectively, what…

A: There are two products, i.e., A and B. Income (m) = 60. Price of good A (Pa) = 4 Price of good B…

Q: True or False: (   ) when AVC curve is ˃ MC curve, then ATC has a negative slope  (   ) If MUy / Py…

A: Average variable cost (AVC) is total variable cost divided by output. Marginal cost (MC) equals the…

Q: Utility maximization - Trading off labor and leisure The indifference curves on the following graph…

A: Hello. Since your question has multiple sub-parts, we will solve the first three sub-parts for you.…

Q: Q9. Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F. Suppose as Case X, Total…

A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…

Q: Solve the attachment

A: The marginal rate of substitution is an economic measure that is used to compute the trade-off made…

Q: The utility function for commuting is u(w, 1, c) = -11 · w – 3 ·1 - 15· c, where w is walking time…

A: Given, u(w, t, c) = -11.w - 3.t - 15.c

Q: Distinguish between form, time, and place utility with at least one real example each.

A: Possession utility is the value or utility that a consumer derives from being able to take…

Q: Given a market rate of interest, r, and a subjective consumer time discount rate, 8; explain and…

A: The interest rate is a proportion of the principal—the amount borrowed—that a lender charges a…

Q: The graph below shows the budget constraint between income and leisure for an individual. The…

A: A budget constraint is defined as the combination of all the goods and services that a consumer can…

Q: Clearly comment on the validity of the statement as True or False. Justify your answer in either…

A: The following statement is false . Because slope of indifference curve is convex due to diminishing…

Q: Consider an individual whose preferences are represented by the utility function U(x1,x2) = min…

A: Since you have posted multiple parts questions, we will solve the first three parts for you. If you…

Q: Suppose you have two different job offers. The first offer is in LA and pays $8100 per  month. The…

A: Utility is maximized when MUF / MUH = PF / PH MUF = ∂U/∂F = 0.3 x (H/F)0.7 MUH = ∂U/∂H = 0.7 x…

Q: Consider the indirect utility function: v(p1; p2; m) = m /(p1 + p2). What is the Hicksian demand…

A: In microeconomics, a consumer's Hicksian demand function or compensated demand function for a decent…

Q: Joanne has just completed high school and is trying to determine whether to go to junior college for…

A: Saving is the amount of money that an individual keeps aside from his total income after incurring…

Q: oanne has just completed high school and is trying to determine whether to go to junior college for…

A: The idea of opportunity cost is inherent in the question, it is the cost of the next best…

Q: Consumer theory is built based on the concept of indifference curves, budget constraint lines, and…

A: The indifference curve indicates the alternate combination of two goods which gives the same level…

Q: Show how to construct the reference dependent utility function for two friends Ka and Mary whose…

A: The reference utility function for each individual can be calculated as below For Kate, investment…

Q: The reason the substitution effect works to encourage a consumer to buy less of a product when its…

A: When the price of good changes there are two effects of this one is income effect the other one is…

Q: Consider the following indirect utility function v(p1,P2,y) = a) Calculate the equivalent variation…

A: Equivalent Variation refers to the amount of income which is to be provided or taken from  consumer…

Q: The law of diminishing marginal utility states that Multiple Choice O total utility is maximized…

A: Utility is defined as the total amount of satisfaction derived from the consumption of a good.…

Q: Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F. Suppose as Case A, Total income…

A: The maximum utility that a consumer can get with the given goods and their quantities, with a…

Q: How many hours will a person allocate to leisure activities if her indifference curves between…

A: If the indifference curves are concave to the origin, it implies that a worker can either work all…

Q: The income-consumption curve for Dan between Qa and Qb is given by: Qa= Qb. His budget constraint is…

A: Given Budget = 120 Qa = Qb Now, 120 = Qa + 4Qb Put value of Qa = Qb 120 = Qb + 4Qb 120 = 5Qb Qb =…

Q: alculate the marginal rate of substitution (MRS12) for the following utility function: U(q1,q2)=…

A: Marginal rate of substitution refers to the slope of an indifference curve. It is calculated as the…

Q: Now suppose Henry has $900 to spend rather than $450. How will this change affect Henry's budget…

A: A straight line with a slope that shows a downwards figure and involves all the possible…

Q: Which of the following statements is correct? The consumer's indifference curves are concave. An…

A: The indifference curve shows different combinations of two goods that given individual an equal…

Q: Suppose an optimizing individual's preference for work versus leisure is described by U = 11/2R,…

A: An individual will work till his utility from work is greater than or equal to utility from the…

Q: Suppose that there are only 10 individuals in the economy each with the following utility function…

A: U (c1, c2) = c1 +C2 c1 is consumption today, c2 is consumption tomorrow.

Q: Assume you define your permanent income as the average of your income from this and the past four…

A: Permanent income for last five years (including this year's) = (40000 + 38000 + 34000 + 32000 +…

Q: Which of the following best describes the income effect? Group of answer choices   The price of…

A: The markets are the place where the meeting, and interaction of the buyers, and sellers take place.…

Q: Assume you can work as many hours you wish at £12 per hour (net of tax). If you do not work, you…

A: ANSWER

Q: An individuals utility function is given by U = 340x1 + 960x2 + 2x1x2 – 2x – x;/2, - - when the…

A:

Q: Sam enjoys leisure time and money, which comes from working. • Sam has 16 non-sleeping hours in a…

A: Given information Sam has 16 hours for work Wage rate=$10 per hour $1 gives utility=1 unit He gets…

Q: Select the true or false for the following statement also give the explanation and support your…

A: Utility refers to the total amount of satisfaction that derived from the consumption of goods and…

Q: Assume you can work as many hours you wish at £12 per hour (net of tax). If you do not work, you…

A: Here there is a situation where we can work as many hours as we can want at the rate of £12 per hour…

Q: Ebrima gets $3 per month as an allowance to spend any way he pleases. Because he likes only peanut…

A: Two goods or services are said to be complements for each other when the utility to be derived from…

Q: what is the budget line for consumption and leisure if a person faces a constant wage of $5 per hour…

A: The budget line is the graphical representation that shows the combination of two products that a…

Q: Use diminishing marginal utility theory to explain why people would prefer stable income to receive…

A: Diminishing marginal utility state that, other thing remains the same, as consumption increases the…

Q: Consider an indifference curve for someone deciding how to allocate time between work (and thus…

A: As the wages increase, the person would be willing to work more to earn more wages. So, he will give…

Q: Terry attends college and works part-time in a drug store. She can work up to 40 hours each week and…

A: Marginal utility : the marginal utility of a good is the change in the utility from an increase in…

Q: Consumers always wanted to maximize their level of satisfaction  a. budget is equal to income b.…

A: To maximize the level of satisfaction, consumer must spend budget on the item which gives higher…

Q: Assuming we have a choice where we work and how many hours we want to work, what determines the…

A: If an individual wants to earn a higher income, they will prefer to work over leisure. This implies…

Q: Suppose your only source of income is work and that you are paid $20 per hour. This determines a…

A: Optimal bundle is where budget constraint is tangent to indifference curve.

Q: Michelle is a saver, and consumption in period 1 is a normal good. If there is an increase in the…

A: Consumer spending is thought to be affected by higher interest rates by both substitution and income…

Q: Merge the two budget constraints into a single lifetime budget constraint by eliminating savings…

A: The consumption function shows the positive relationship between disposable income and consumption.…

Q: When leisure is a normal good, the income effect from an increase in wages is manifest in a(n):…

A: A good is a normal good when its demand increases with increase in income. When leisure is a normal…