Tollowing one-penod model. Consumer Utility function over consumption (C) and leisure (L) 11 U(C.L) = cL? Total hours: H = 40 Labour hours: N° =H-L Non-labour income: T Lump-sum tax: T Hourly wage: w Eirm Production function: Y= zF(N) = zN Total factor productivitly: z 2 Government Government spending (exogenous): G= 20 Suppose that the total factor productivity, z, increases to 5. What is the substitution effect of this wage change OA. -5.51 B. -8.51 O C. +5.51 D. +8.51 OE None of the above
Tollowing one-penod model. Consumer Utility function over consumption (C) and leisure (L) 11 U(C.L) = cL? Total hours: H = 40 Labour hours: N° =H-L Non-labour income: T Lump-sum tax: T Hourly wage: w Eirm Production function: Y= zF(N) = zN Total factor productivitly: z 2 Government Government spending (exogenous): G= 20 Suppose that the total factor productivity, z, increases to 5. What is the substitution effect of this wage change OA. -5.51 B. -8.51 O C. +5.51 D. +8.51 OE None of the above
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.6P
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![Consider the following one-period model.
Consumer
Utility function over consumption (C) and leisure (L)
1 1
U(C.L) = cL?
Total hours: H = 40
Labour hours: N -H-L
Non-labour income: TT
Lump-sum tax:T
Hourly wage: w
Firm
Production function: Y = zF(N") = zN
%3D
Total factor productivitiy: z= 2
Government
Government spending (exogenous): G = 20
Suppose that the total factor productivity, z, increases to 5. What is the substitution effect of this wage change on labour supply(Ny
O A. -5.51
B. -8.51
C. +5.51
O D. +8.51
E None of the above](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7c0e670a-2918-48e3-8b61-1204d22c3f04%2F80d2e7bc-1004-463e-97c6-374b1e01d61e%2F6osqpd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the following one-period model.
Consumer
Utility function over consumption (C) and leisure (L)
1 1
U(C.L) = cL?
Total hours: H = 40
Labour hours: N -H-L
Non-labour income: TT
Lump-sum tax:T
Hourly wage: w
Firm
Production function: Y = zF(N") = zN
%3D
Total factor productivitiy: z= 2
Government
Government spending (exogenous): G = 20
Suppose that the total factor productivity, z, increases to 5. What is the substitution effect of this wage change on labour supply(Ny
O A. -5.51
B. -8.51
C. +5.51
O D. +8.51
E None of the above
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