Consider an economy with a single (representative) agent with utility function u(x, lc) = x1/5 4/5 and an endowment of 0 units of x and 10 units of time, which the agent can use as leisure (lc) or labor (L) (i.e., L + L = 10). The agent owns a firm that produces good x using L as an input, with technology of production given by x(L) = 3√L. Let the price of x be p = 1 and let w denote the price of time (i.e., the price of leisure and the wage). Find the competitive price of time w and the competitive allocation.

Consider an economy with a single (representative) agent with utility function u(x, lc) = x1/5 4/5 and an endowment of 0 units of x and 10 units of time, which the agent can use as leisure (lc) or labor (L) (i.e., L + L = 10). The agent owns a firm that produces good x using L as an input, with technology of production given by x(L) = 3√L. Let the price of x be p = 1 and let w denote the price of time (i.e., the price of leisure and the wage). Find the competitive price of time w and the competitive allocation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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