Robinson has preferences described by the utility function u(c, h) = log c – yh, where c denotes consumption and h hours of work. Assume that the total number of available hours is equal to one so that l+h = 1. The production function is y = Ahª, with 0 < a < 1. (a) What is the optimal choice of hours worked, h*? (b) What happens to h* if A rises? (c) What happens to h* if we increase the value of y?
Q: Mary has two dinner options available: eating a home cooked meal for $150 per meal, or at a…
A: Good X = home cooked good Good y = restaurant meal Equation of budget line : 150x+ 260y = 2500
Q: If the return to labor decreases, then the income effect: O Offsets the substitution effect if…
A: The return to labour is the wages that the workers gets in lieu of the work done. When the return…
Q: Leandro has 16 hours per day that he can allocate to work or leisure. His job pays a wage rate of…
A: The equation of the budget line : C=320-20L The slope of the budget line is -20 or -wage rate. To…
Q: An individual preference scale for two goods x and y is defined by the marginal rate of substitution…
A: Utility functions define the level of satisfaction or welfare of consumer with the given level of…
Q: Suppose the production budget is $200/hour, the wage is $5/hour, and the cost of capital is…
A: Isocost is a downward sloping curve which shows different combinations of labor and capital that can…
Q: complementary inputs occur where substitution is possible between the two * inputs True O False
A: Complementary inputs are inputs to production that a firm uses closely together. Hence if a firm has…
Q: For the typical Cobb-Douglas function, q=…
A: The function is given as follows: The MRTS (Marginal rate of technical substitution) refers to the…
Q: Suppose a student’s entire weekly pocket money (income) is spent on cafeteria’s fast food and hut’s…
A: Budget Line shows the combination of two goods a consumer can purchase with his/her given income and…
Q: The optimal quantity of a product A in an optimal bundle (of products A, B, C,..., etc.) will be…
A: The optimal consumption bundle refers to a consumption bundle that maximizes a consumer's TU given…
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: Q.7 A consumer's utility function is given by the expression: U = {0.6x"s + 0.4y"s). Determine the…
A: The marginal utility of a good or service is the change in the utility from an increase in the…
Q: Consider the following utility function: ху U(x,y): х — у (a) Derive the MRS of x to y. Show your…
A: U(x,y) = xyx-y
Q: In the Heckscher-Ohlin (H-O) model, Explain with the help of a graph the effect of an increase in…
A: A relative price is described as the P {"price"} of a service or a commodity that measured in…
Q: en to salaries and wages when you are in a production/manufacturing business that you want to…
A: 1a. .In long run as part of more than one business cycle, all cost become variable. In short run…
Q: is is clearly a case of: (a) Law of supply (b) Law of diminishing returns (c) Law of diminishing…
A: # In Economics, the satisfaction derived from a unit is calculated in terms of how much utility is…
Q: A firm is attempting to maximize output given a budget. Draw a graph that illustrates the…
A: Isocost line- It is a producer budget line.It is a line that represents different combination of two…
Q: Budget constraints provide a visual image the represents what a person can afford, given the price…
A: All individuals in the economy can purchase goods and services by the means of income that the earn…
Q: A firm buys two inputs, labor L and capital K, the total amount of which cannot exceed 100 units.…
A:
Q: Define marginal product and explain the law of diminishing marginal utility advocated by David…
A: Production function depicts the relationship between the inputs and the output. The inputs are the…
Q: Miles is an engineering student who uses all his income to buy instant coffee and food. Miles's…
A:
Q: Suppose that the cost of living increases, thereby reducing the purchasing power of your income. If…
A: Income effect refers to the concept that as the change in quantity of goods and services due to a…
Q: The production functions display the standard properties, including constant returns to scale. A…
A: Given information Household utility function: U(ca ,cb) There are 2 goods and 2 inputs given…
Q: What are the conditional demands for input C and E?
A: A production function shows the relationship between the inputs in the production and the output…
Q: Let the production function of a firm be x - x2, where x and x2 are factors of production. The firm…
A: Given information Q=X1βX2 4X1+9X2=32
Q: Amount of input used in the production process affects the Total Utility. O True O False
A: Hi! Thank you for the question As per the honor code, We’ll answer the first question since the…
Q: What is the marginal physical productivity (MPP) of the inputs given the function Q=18x21+2x1x2+2x22…
A: Marginal physical product (MPP) is the change in the level of output due to a change in the level of…
Q: A college football coach says that given any two linemen A and B, he always prefers the one who is…
A: Hi Student, thanks for posting the question. As per the guideline we are providing answers for the…
Q: (a) Explain with the help of a graph the effect of an increase in the relative price of a labor-…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: A firm faces the production function Q = 6K0 L0.5. If it can buy input K at £32 a unit and input L…
A: Cost is minimized when marginal rate of technical substitution equals price ratio of inputs.…
Q: Derive with the help of indifference curves and the budget constraint the optimal consumption plan.…
A: The optimal consumption plan from budget constraints and indifference curve firstly we take Price…
Q: Say you were interested in maximizing U = U(x,y) with the usual budget constraint, M = Px*x+Py*Y.…
A: Given, Utility function : U=U(x, y)Budget Constraint : M=Px*x+Py*y
Q: A household of a wife and husband get utility from hours spent watching HBO (Z). To produce one unit…
A: Given,
Q: 100 84 75 15 16 19 20 24 Hours of free time per day The diagram shows a student's indifference…
A: IC (Indifference curve) shows the different agreement of two commodities between which a consumer is…
Q: Suppose that the cost of living increases, thereby reducing the purchasing power of your income. If…
A: There is income inequality in the world. That is because some people get lower wages and some people…
Q: Given the production function per hour Q(x, y) = −2x² − 4y² + 40 + 40y, where x is a worker…
A: Here we have:- Qx,y=-2x2-4y2+40x+40y In this situation:- x is a worker who receives $1 per hour and…
Q: Joko is a university student, working part-time at copying service center for Rp. 8/hour with zero…
A: The utility is the level of satisfaction which is derived from the labor income which is derived…
Q: Production function: q= 3.2f+0.2fl+1.6l f is the amount of fertilizer l is the hours of labor…
A: We use the formulas: Total Revenue = Price*Quantity Total Profit = Total Revenue - Total Cost
Q: Given the utility function, where U is the total utility and x and y are the commodities consumed,…
A: U(x,y) = (5x+3)2(4y+2)3
Q: A wage increase would rotate the budget constraint more to the x axis, where x axis is hours…
A: At the marketplace, wage rate refers to the rate at which a firm hires a worker and pays an amount…
Q: suppose a consumer's marginal rate of substitute is three slice of pizza for one coke . if the price…
A: Given, MRS pizza for coke = MU of Pizza/ MU of coke = 3/1= 3 The optimal condition where the…
Q: An individual’s utility function is given by where is the amount of leisure measured in hours per…
A: The utility is: U=1000+450x₂+5x₁x₂-²x₁-x²
Q: Assume that prices are the same as used in part a. If the marginal utility of a Yoghurt is 20, what…
A: The marginal utility of a good or service is the change in the utility from an increase in the…
Q: The production of a product is characterised by the function f(x, y) = 16x'/4y³/4, where x is the…
A: Production function: f(x,y), Q = 16x0.25y0.75 Cost of labor (w ) = 50 Cost of capital (r ) = 100…
Q: Once a scale of preference is drawn, it is important that choice is made among the several…
A: Once a scale of preference is drawn, it becomes important that choice is made among the several…
Q: transformation of a utility function represents the same preference, hence the spacing between…
A: A line that is being drawn through the set of points at which there is the production of the same…
Q: If the price of good X is $40 and the price of good Y is $35 Find the value of Marginal rate of…
A: The information being given is:- Price of good (Px ) = $40 Price of good (Py ) = $35 We have to…
3.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- You have £20 per week to spend, and two possible uses for this money: telephoning friends back home, and drinking coffee. Each hour of phoning costs £2, and each cup of coffee costs £1. Your utility function is U(X,Y) = XY, where X is the hours of phoning you do, and Y the number of cups of coffee you drink. What are your optimal choices? What is the resulting utility level? You can use the standard result on the constrained maximization of such a function, but must state it clearly. Now suppose the price of telephone calls drops to £1 per hour. What are your optimal choices? What is the resulting utility level? How much income per week will enable you to achieve the same quantities at the new prices as the ones you chose before? What income will enable you to attain the same utility as you did before? Comment on your answer in the context of equivalent variation and compensating variation.What is the optimal number of work hours for the student whose utility function for other goods (X) and leisure (L) is U (C,L) = CL, and who has $50 of nonlabor income per week and the possibility to work at $5 per hour. Assume that after studying for class & other activities, the student has only 50 hours per week remaining to choose between work and leisure.Consider a utility function l(X_{A}, X_{B}) = X_{A}*X_{B} Let P_{A} =\$3 and P_{B} =\$2. and income is set at M =\$40. Suppose P_{B} falls to P_{B}' = 1 1. Before the price change, what was x_{A} ^ * and x B^ * the optimal consumption bundles? Sketch the original budget line and label the point ( x_{A} ^ * ,x B ^ * ) as A. Let x_{A} be on the horizontal axis. 2. If, after the price change, income changed so that the original optimal bundle is just as affordable. What is the new income, m' ? At (p_{A}, p_{B}', m') what is the new optimal bundle (x_{A}', x_{B}')' Sketch the budget line associated with p_{A}, p_{B}', m' ) . Label the point (x_{A}', x_{B}') as B. 3. Does the substitution effect result in more x_{B} ? How many more or fewer? 4. After the price change, how much x_{A} and x_{B} are actually bought. ( x_{A} ^ prime prime ,x B ^ prime prime )? Sketch the budget line associated with (p_{A}, p_{B}', m) Label the point x_{4} ^ prime prime , x_{R} ^ prime prime ) as C. 5.…
- Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F Suppose as Case 1, Total income is $100 and per unit prices of Food (F) and Cloth (C) are $2 and $15, respectively, then: a) What is the value of MRS at the optimal point and what does this value mean? b) What is the optimal consumption bundle i.e (F*,C*)? c) Also plot the budget line and clearly depict the point of optimality in the F (x-axis)-C (y-axis) spaceConsider a utility function: U (F,C) = FC so MU_F = C and MU_C = F Suppose as Case 1, Total income is $100 and per unit prices of Food (F) and Cloth (C) are $2 and $10, respectively, then: a) What is the value of MRS at the optimal point and what does this value mean? b) What is the optimal consumption bundle i.e (F*,C*)? c) Also plot the budget line and clearly depict the point of optimality in the F (x-axis)-C (y-axis) space Now assume a new Case 3, where instead of one time income change, Pc' = $15, holding all else the same as in Case 1, do the same analysis (parts a-c) and contrast your answers to Case 1. For part c, you should draw old (Case 1) and new (Case 3) budget lines/point of optimality.Please answer and explain case 3 and draw draw old (Case 1) and new (Case 3) budget lines/point of optimality.Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F Suppose as Case 1, Total income is $100 and per unit prices of Food (F) and Cloth (C) are $2 and $10, respectively, then: a) What is the value of MRS at the optimal point and what does this value mean? b) What is the optimal consumption bundle i.e (F*,C*)? c) Also plot the budget line and clearly depict the point of optimality in the F (x-axis)-C (y-axis) space Case # 2 assuming if income increases to $120, holding all else the same, do the same analysis (parts a-c) and contrast your answers to Case 1. For part c, you should draw old (Case 1) and new (Case 2) budget lines/point of optimality.
- Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F Suppose as Case 1, Total income is $100 and per unit prices of Food (F) and Cloth (C) are $2 and $10, respectively, then: a) What is the value of MRS at the optimal point and what does this value mean? b) What is the optimal consumption bundle i.e (F*,C*)? c) Also plot the budget line and clearly depict the point of optimality in the F (x-axis)-C (y-axis) space Case # 2 assuming if income increases to $120, holding all else the same, do the same analysis (parts a-c) and contrast your answers to Case 1. For part c, you should draw old (Case 1) and new (Case 2) budget lines/point of optimality.Please answer and explain case 2 and compare their budget lines/point of optimality.Dick, Jane, and their dog, Spot, share an apartment. Their utilities depend upon the cleanliness of the apartment and the hours spent doing housework. Dick and Jane are both averse to housework, though Dick finds it especially troublesome. Their utility functions are where c is an index of cleanliness and h represents hours of housework. The degree of cleanliness is determined by the “production function” a) Define the marginal rate of substitution MRSi as the increase in cleanliness that exactly compensates person i for one more hour of housework: and define the marginal rate of transformation as the number of hours of leisure that must must be given up to generate a one unit increase in cleanliness. Find the Samuelson condition for this economy. b) An allocation is a triplet (h D, hJ, c). What two conditions must a Pareto optimal allocation satisfy? Show that there are Pareto optimal allocations in which Dick, despite his aversion to housework, does more…Q11. Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F. Suppose as Case A, Total income is $120 and per unit prices of Food (F) and Cloth (C) are $2 and $10, respectively. a. What is the value of MRS at the optimal point and what does this value mean? b. What is the optimal consumption bundle i.e (F*,C*)? c. Plot the budget line and clearly depict the point of optimality in the F (x-axis)-C (y-axis) space.
- Assume an individual's utility from consuming good #1 and good #2 is given by the following function: U (q1 , q2) = min (q1 , 2q2) Suppose the price of good #1 is $1 (p1=1) and the individual's income is $10 (y=10). If this individual's utility maximizing decision is to purchase 2 units of good #2 (q2=2), what must be the price of good #2?A student spends 165 HUF on books (x) and renting bikes (y). The price of an average book is 12 HUF and renting a bike for 1 hour costs 15 HUF. The preferences of the student are given by her utility function U(x,y) = x^(0.9)y^(0.1). Assuming that the student is rational, for how many hours is she renting a bike if she can only rent the bike for round hours?Aisha is considering how to allocate the next 6 hours of her free time. She could choose between leisure (L) and helping her neighbour with the house chores. If she decides to help her neighbour, she is going to get paid at £25 per hour, which she can then spend on her favourite pizza (P). Suppose the price of pizza is £12.50. Aisha’s preferences for leisure and pizza are given by the following utility function: . U(L,P)= 3L + P MU(L)= 3 MU(P)=1 Write down Aisha’s budget equation and draw the corresponding budget line. Clearly label the axes and calculate the coordinates of the points of intersection of the budget line with each axis. Calculate Aisha’s marginal rate of substitution between leisure and pizza. Explain the concept of MRS and interpret the figure obtained. Find Aisha’s optimal consumption bundle, both algebraically and graphically. Explain your reasoning. Would Aisha’s optimal choice change if she could get a discount on her pizza purchases so that each pizza would cost…