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Assume that Erica's preferences for wages and risk are given by the utility U =W x e-12R. Her friend Rambo's utility function is U = W x e-3R. Assume that W represents the hourly wage and that there is a range of job types within a particular firm, each having a different level of risk R. Erica's utility function implies that the slope of her indifference curve with respect to R (the MRS) is 12W. Rambo's MRS is 3W. The isoprofit for the firm is given as W = 60 x R (do not worry that the isoprofit is a straight line rather than a strictly concave curve).
Determine Erica's choice of wage and risk (algebraically).
Determine Rambo's choice of wage and risk. Sketch a diagram showing these choices.
Show what the consumer's indifference curves look like and determine both graphically and algebraically what consumption bundle (C,L) the consumer chooses. Show that optimal consumption bundle depends on the relationship between a/b and w, and expl..
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 30..
Suppose that the Phillips curve is given by ft-?t^e= 0.1-2ft where ft^e=ft-1 Suppose that inflation in year t-1 is zero. In year t, the authorities decide to keep the unemployment rate at 4% forever. 1. Compute the natural rate of unemployment
Arrow now sells 100,000 silk shirts at $100 each. The material per shirt costs $40 and labor costs are $50 per shirt. The firm has $1.2m. in fixed costs. Price elasticity of demand for such shirts is -4. The firm is considering lowering the price ..
The cost associated with maintaining rural highways follows a predictable pattern. There are usually no costs for the first three years, but maintenance is required for restriping, weed control, light replacement, shoulder repairs, etc. For one se..
An industry consists of two firms, each of which have variable costs of $10 per unit but no fixed costs. The industry demand curve is P = 70 - Q. Solve for the Cournot equilibrium. In doing so, derive the reaction function of each firm (call Q1 an..
Suppose honey is produced in beehive using bees and sugar. Each honey producer uses one beehive which she rents for $1/month. Producing q gallons of honey requires spending q dollars on bees and q^2 on sugar.What is the Total cost of producing q un..
According to the News on page 677, what percentage of retail jobs would be lost if the minimum wage were increased to $9.50 Obama Wants $9.50 Minimum Wage (Crains)- When Barack Obama and his fellow Democrats take power in Washington.
The price at point a is $70 and the price at point c is $10 per bag. The price at point d is $56 and the price at point e is $31 per bag. The price at point f is $67 and the price at point g is $32 per bag.
A spike in the unemployment rate - the biggest in more than two decades - raised new concerns Friday that a weak labor outlook, high oil prices and continuing woes in the housing and credit markets are leading the U.S. economy into a painful reces..
What are the marginal abatement cost functions for each of the two areas? Calculate the loss in the two areas due to over-control (for the rural area) and under-control (for the urban area).
Suppose that the price of salt rises from 15 cents to 17 cents a kilogram. The quantity demanded decreases from 525 kilograms to 475 kilograms per month, and the quantity supplied increases from 525 kilograms to 600 kilograms per month.
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