Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Macroeconomics Expert

Exercise 1

Assuming that the utility is Cobb-Douglas (U (C,l) = Cαlβ). First formally prepare down the consumer’s problem. Then, answer the problems in the problem. No algebra is necessary to answer the problems, describe your answers using clearlylabeled graphs and intuition.

Suppose that a consumer can earn a higher wage rate for working overtime. That is, for the first q hours the consumer works, he or she receives a real wage rate of w1, and for hours worked more than q he or she receives w2, where w2 > w1. Suppose that the consumer pays no taxes and receives no nonwage income, and he or she is free to choose hours of work.

(a) Draw the consumer’s budget constraint and show his or her optimal choice of consumption and leisure.

(b) Show that the consumer would never work q hours or anything very close to q hours. describe the intuition behind this.

(c) Determine what happens if the overtime wage rate w2 increases. describe your results in term of income and substitution effects. You must consider the case of a worker who initially works overtime, and a worker who initially does not work overtime.

Exercise 2

Consider a competitive firm that has a production function given by Y = zF (K,N) where z > 0 and K > 0 are exogenous and faces wage w > 0.

(a) prepare down the problem of the firm.

(b) Now suppose that Y = N1/2. find out the demand function for labor of the firm. describe the intuition of the algebraic expression you found.

Exercise 3

Suppose a firm has a production function given by F (K,N) = Kα Nβ .

(a) What are the restrictions on α and β implied by the assumption that the marginal product of capital and labor are positive?

(b) What are the restrictions on α and β implied by the assumption of constant returns to scale?

(c) Prove that the restrictions obtained in parts (a) and (b) imply that the marginal product of labor decreases as the quantity of labor increases.

Exercise 4

Consider a simple one-period, closed-economy model where the representative consumer has utility function U(C,l) = C1/2l1/2 and has h available hours to divide between work and leisure. The representative firm has technology given by Y = zK1/3N2/3. There is a government that sets its expenditure level at a value G.

(a) Define a competitive equilibrium for this economy.

(b) Prove that Walras’ Law applies.

(c) Find the competitive equilibrium values ( ^C, ^Ns, ^N d, ^ T, ^ w) given parameters h = 20, z = 1, K = 1000, and G = 0.

Exercise 5

Consider the same economy described in Exercise 4.

(a) Set up the equivalent social planner’s problem with the choice variables being (C,N).

(b) Using the parameters in Exercise 4, part (c), solve for the Pareto optimal consumption and employment levels, (C*,N* ).

(c) Formally state the FirstWelfare theorem relating your solution to part (b) and the competitive equilibrium allocation found in Exercise 4, part (c).

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M91706
  • Price:- $70

Guranteed 36 Hours Delivery, In Price:- $70

Have any Question? 


Related Questions in Macroeconomics

Use at least two 2 of the following arguments from chapter

Use at least two (2) of the following arguments from Chapter 10 in your paper: normative, positive, anecdote, and evidence arguments to present your positions. Clearly label these to receive credit.

1 what is opportunity cost and what does it mean2 what are

1. What is opportunity cost and what does it mean? 2. What are the eight guideposts to economic thinking and how to incentives fit into thinking like an economist? 3. What role does scarcity play in economic thought? Doe ...

The government uses policies like student loans and free

The government uses policies like student loans and free trade to influence the economy's growth rate. Write a thoughtful and articulate paper that includes the following: Identify at least four policies from the textboo ...

Economic essaylate papers will get a penalty of 2pts per

ECONOMIC ESSAY Late papers will get a penalty of 2pts per day During the last part of the course, we have read two chapters from the book titled: Why nations fail. On Chapter 2 - Theories that don't work- the authors pre ...

Derive the is curve in the y i space using the aggregate

Derive the IS curve in the (Y, i) space using the aggregate demand plot in the (Y, AD) space.

What are the causes of market failure or when and why do

What are the causes of market failure, or when and why do markets fail to provide a socially optimal allocation? Explain & give examples of four types of market failure.

Why scarcity is the fundamental economic problem that all

Why scarcity is the fundamental economic problem that all societies face? Then, explain what we study in microeconomics and macroeconomics.

1 which countries consume the most dung and how do the

1. Which countries consume the most dung and how do the energy statistics in the BP Statistical Review account for it? 2. Explain why consumption of a particular energy source typically ceases long before the stock of su ...

Complete parts a and b completelypart a suppose nominal gdp

Complete Parts A and B completely (Part A) Suppose nominal GDP in 2012 was $200 billion, and in 2014, it was $210 billion. The general price index in 2012 was 100 and in 2014 it was 105. Between 2012 and 2014, the real G ...

900-1100 words no plagiarism pleaseread the article how

900-1100 words, no plagiarism please. Read the article How will refugees affect European economies. http://bruegel.org/2015/10/how-will-refugees-affect-european-economies/ Provide responses to the following:  Summarize t ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen