Nora's utility function is given by U = In(C) + In(L), where U is utility, C is consumption, and L is leisure. The total time Nora has is T = 1 and is a utility maximizer. Before the Covic pandemic, the wage rate is 10, and Nora has no non-labor income. When the pandemic hit and part of the economy was locked down, Nora's wage rate decreased to 8. However, the government provided income support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has a total amount of time T = 1 for leisure and work during the pandemic. Which of the following statements is correct? O Before the pandemic, Nora's labor supply is 0.2. O Before the pandemic, Nora spent time equal to 0.2 on leisure. O Before the pandemic, Nora's consumption was 9. O During the pandemic, Nora's labor supply is 0.5. O During the pandemic, Nora was better off for having a higher utility level. O During the pandemic, Nora's labor supply is unchanged becauses income effects were perfectly offset by the substitution effect from the wage drop.
Nora's utility function is given by U = In(C) + In(L), where U is utility, C is consumption, and L is leisure. The total time Nora has is T = 1 and is a utility maximizer. Before the Covic pandemic, the wage rate is 10, and Nora has no non-labor income. When the pandemic hit and part of the economy was locked down, Nora's wage rate decreased to 8. However, the government provided income support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has a total amount of time T = 1 for leisure and work during the pandemic. Which of the following statements is correct? O Before the pandemic, Nora's labor supply is 0.2. O Before the pandemic, Nora spent time equal to 0.2 on leisure. O Before the pandemic, Nora's consumption was 9. O During the pandemic, Nora's labor supply is 0.5. O During the pandemic, Nora was better off for having a higher utility level. O During the pandemic, Nora's labor supply is unchanged becauses income effects were perfectly offset by the substitution effect from the wage drop.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Nora's utility function is given by U = In(C) + In(L), where U is utility, C is consumption, and L is leisure. The total time Nora has is T = 1 and is a utility maximizer. Before
the Covic pandemic, the wage rate is 10, and Nora has no non-labor income. When the pandemic hit and part of the economy was locked down, Nora's wage rate
decreased to 8. However, the government provided income support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has a total amount of
time T = 1 for leisure and work during the pandemic. Which of the following statements is correct?
O Before the pandemic, Nora's labor supply is 0.2.
O Before the pandemic, Nora spent time equal to 0.2
O Before the pandemic, Nora's consumption was 9.
O During the pandemic, Nora's labor supply is 0.5.
leisure.
O During the pandemic, Nora was better off for having a higher utility level.
O During the pandemic, Nora's labor supply is unchanged becauses income effects were perfectly offset by the substitution effect from the wage drop.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fae2d9684-12b8-4882-8709-1c12636b95b3%2Fcbeadc01-91b8-4040-afa2-faa6f2ef425f%2Fh6vm3po_processed.png&w=3840&q=75)
Transcribed Image Text:Nora's utility function is given by U = In(C) + In(L), where U is utility, C is consumption, and L is leisure. The total time Nora has is T = 1 and is a utility maximizer. Before
the Covic pandemic, the wage rate is 10, and Nora has no non-labor income. When the pandemic hit and part of the economy was locked down, Nora's wage rate
decreased to 8. However, the government provided income support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has a total amount of
time T = 1 for leisure and work during the pandemic. Which of the following statements is correct?
O Before the pandemic, Nora's labor supply is 0.2.
O Before the pandemic, Nora spent time equal to 0.2
O Before the pandemic, Nora's consumption was 9.
O During the pandemic, Nora's labor supply is 0.5.
leisure.
O During the pandemic, Nora was better off for having a higher utility level.
O During the pandemic, Nora's labor supply is unchanged becauses income effects were perfectly offset by the substitution effect from the wage drop.
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