4. Winona has 80 hours to divide between leisure and labor. Her utility function is u(r,c) =f(r) + c, when r represents hours of leisure, c represents dollars of consumption, and fisstrictly concave. Winona's wage is wo = $15/hr. initially, then it rises to wi = $20/hr.(i) Explain what happens to Winona's labor supply when the wage rises, and why.(ii) Explain how the answer to (i) would change if Winona were to win a lottery.

In the question above, it is given that : 80 hours are divided between leisure and labor. Utility…

Answered: 4. Winona has 80 hours to divide…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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23. A worker has utility over consumption c and leisure I given by U(c,1) = a 6-6 + 18 where 0 << 1 She has T hours to allocate between leisure and work. For each hour she works, she earns a wage of w to spend on consumption c. The price of c is 1. She also receives an additional 'non-labor income' m regardless of how much she works. She maximizes utility subject to the following constraints: contact@cloure.m Assume interior solution, then cw(T-1) +m C≥O 0≤1≤T A. c is normal and I is inferior good. B. c is inferior and I is inferior good. C. c is inferior and I is normal good. D. c is normal and I is normal good. Page 8
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Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of additional hours the bakery is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $12 per hour. Refer to Table 1-1. Using marginal analysis, how many hours should Eva extend her bakery's hours of operations? 2 hours 3 hours 4 hours 5 hours
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