13. (Use this information to answer qustion 13 - 16) Suppose a householdsolves the following two-period consumption-savings problemmax u(c₁) + Bu(c2){C1,C2}s.t. aw Y1 - C1C2y2(1+r)awith u(c) = √c where c₁ is consumption at time 1, c2 is consumption attime 2, y₁ is houshold income at time 1, 2 is houshold income at time2 and w is the initial wealth. Suppose the incomes of the household are$50 in time 1 and $210 in time 2. The initial wealth is $100, the discountfactor is 0.975 and interest rate is 5%. Solve for the household's choice ofC1.(a) 125.12(b) 126.58(c) 175.16(d) 341.8814. Now a government wants to introduce income tax in both time 1 and time2 {1, 2} to finance a construction project that costs $50 in time 1 andanother $52.5 in time 2. Which ones of the following are the householdintertemporal budget constraints.(a) y1 + 1/2 =C1+1+1Y2(b) w+y1 + = C₁ +1+r1+r(c) wy1T1 +Y2T21+rY21+r= €1 + 121+r(d) wy171 + =C1+1+rC2 (1+72)1+r15. Solve for the household's choice of consumption in time 1 (c₁) if tax intime 1 (71) is $30.(a) 100.76(b) 125.12(c) 160.97(d) 175.1616. Solve for the private saving.(a) 19.24(b) -5.76(c) -40.97(d) -75.76

Let's go through the questions step-by-step.Question 16

Answered: 13. (Use this information to answer…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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26. Given this diagram; what is the equilibrium level of income? a) 3/4 b) 1/4 Oc) 10 d) 100 O e) 25
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Handwritten solution not required correct answer will get instant upvote.
3. Consider a parent who is altruistic towards her child, but also cares about her own consumption. The parent's utility over her own consumption and that of her child is up = log(co) +a log(ci) where c is the child's consumption, and a > 0 is the degree of parental altruism. Suppose that the parent can invest in the child's human capital by spending money (e) on her education; education generates human capital h /() and human capital is paid at rate w. The parent has a total income of (a) Write down an expression for the child's future consumption in terms of the parent's choice of e. (b) Now write down the Lagrangian for the parent's decision problem.
1. Assume you must choose between two mutually exclusive alternatives: A or B. The explicit benefit you receive from alternative A, bª, is equal to $100. And, the explicit cost of choosing alternative A, c*, is $80. Also, the explicit benefit to choosing alternative B, b", is $120. What is the accounting return for choosing alternative A, r^? Given r and b", what is the explicit cost that you are willingness to pay (WTP) for alternative B, WTP"? Please include the formulas from class in your answer. How would WTPB change ifr^ increased by $5? Explain. your Using the original set of values for explicit costs and benefits, what would be your economic return to choosing alternative How does this relate to the concept of consumer surplus? if the price that you were charged was $95? Please interpret.
6
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