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Hillary's preference for consumption C and leisure ' is given by U(C,'). There are 100 hours available in the week to split between work and leisure. She earns w dollars per hour. The ?rm's technology is given by Y = AEα, where Y is output, A and α are a technology parameters, and E is hours of employment.

(a) Write down Hillary's problem, i.e., clearly state what she is maximizing and what her budget constraint is.

 (b) Write down the ?rm's problem.

(c) De?ne a competitive equilibrium in this environment.

(d) What is the equilibrium rate of unemployment in this environment?

Microeconomics, Economics

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