Exam 8: Buying and Selling-Part A

Dudley's utility function for goods and leisure is U(G, L)= G - (20 - L)(20 - L), where G is consumption of goods and L is the number of hours of leisure per day.Goods cost $1 per unit. a.If Dudley had an income from nonlabor sources of $25 per day and could work as much as he chose to but would get zero wages, how much would he work? b.Sketch Dudley's indifference curves on a graph with leisure on the horizontal axis and income on the vertical axis.If Dudley's nonlabor income were $25 a day and he could work as much as he wished for $10 an hour, how many hours a day would he choose to work?

Georgina earns 6 dollars an hour.She has no nonlabor income.She has 100 hours a week available for either labor or leisure.Her utility function is U(c, r)= cr³, where c is dollars worth of goods and r is hours of leisure.How many hours per week will she work?

Jackie's net demands for x and y are (6, -6)and her gross demands are (15, 15).What is her initial endowment of x?

Mr.Cog has 18 hours per day to divide between labor and leisure.His utility function is U(C, R)= CR, where C is dollars per year spent on consumption and R is hours of leisure.If he has 5 dollars of nonlabor income per day and gets a wage rate of 11 dollars per hour when he works, his budget equation, expressing combinations of consumption and leisure that he can afford to have, can be written as

If a person has no nonlabor income, a decrease in wages causes the budget line between leisure and other goods to shift downward in a parallel fashion.

Jack earns 5 dollars per hour.He has 100 hours per week which he can use for either labor or leisure.The government institutes a plan in which each worker receives a $100 grant from the government but has to pay 50% of his or her labor income in taxes.If Jack's utility function is U(c, r)= cr, where c is dollars worth of consumption of goods and r is hours of leisure per week, how many hours per week will Jack choose to work?

Leo thinks leisure and consuming goods are perfect complements.Goods cost $1 per unit.Leo wants to consume 5 units of goods per hour of leisure.Leo can work as much as he wants to at the wage rate of $15 an hour.He has no other source of income. a.How many hours a day will Leo choose to spend at leisure? b.Draw a diagram showing Leo's budget and his choice of goods and leisure. c.Will Leo work more or less if his wage rate increases?

Wilhelm consumes only apples and bananas.His endowment is 5 units of apples and 10 units of bananas.Both goods are normal goods for Wilhelm.At current prices, Wilhelm is a net seller of apples.If the price of apples rises and the price of bananas stays the same, his demand for apples must decrease.

Ollie South has an endowment of 10 guns and 10 pounds of butter.He can buy or sell butter at $1 a pound.But the world market for guns is more complicated: he can buy guns for $5 each, but he can sell guns for only $2.If we graph his budget line with guns on the horizontal axis and butter on the vertical axis, then Ollie's budget line is a straight line

If all goods, including leisure, are normal goods, then an increase in the wage rate will necessarily make people want to work more hours.

Will is paid $10 an hour for the first 40 hours per week that he works.He can also work as many hours overtime as he wishes to.He is paid $15 an hour for every hour that he works beyond 40 hours a week.Leisure is a normal good for Will and he is currently working some overtime.If his hourly wage for the first 40 hours per week that he works rises to $12 and his wages for overtime remain at $15 per hour, he will choose to work

Fanny consumes x and y.The price of x is $9 and the price of y is $9.Fanny's only source of income is her endowment of 12 units of x and 12 units of y which she can buy or sell at the going prices.She plans to consume 13 units of x and 11 units of y.If the prices change to $12 for x and $12 for y,

Yolanda receives a lump sum child support payment of $150 per week.She has 80 hours a week to divide between labor and leisure.She earns $5 an hour.The first $150 per week of her labor income is untaxed, but all labor income that she earns above $150 is taxed at the rate 30%.If we graph her budget line with leisure on the horizontal axis and consumption on the vertical axis, her budget line has

Yoram insists on consuming 4 times as much of y as he consumes of x (so he always has y = 4x).He will consume these goods in no other ratio.The price of x is 3 times the price of y.Yoram has an endowment of 20 x's and 45 y's which he can trade at the going prices.He has no other source of income.What is Yoram's gross demand for x?

Milton consumes two commodities in a perfect market system.The price of x is $4 and the price of y is $1.His utility function is U(x, y)= xy.He is endowed with 76 units of good x and no y.Find his consumption of good y.

Holly consumes x and y.The price of x is 4 and the price of y is 4.Holly's only source of income is her endowment of 6 units of x and 6 units of y which she can buy or sell at the going prices.She plans to consume 7 units of x and 5 units of y.If the prices change to $7 for x and $7 for y,

There are no taxes on the first $500 that Debra earns per week, but on income above $500 per week, she must pay a 60% tax.Debra's job pays $10 per hour.Her utility function is U(c, r)= rc², where r is hours of leisure and c is dollars worth of consumption.She has 100 hours to divide between work and leisure.How many hours per week will she choose to work?

Irene earns 8 dollars an hour.She has no nonlabor income.She has 30 hours a week available for either labor or leisure.Her utility function is U(c, r)= cr², where c is dollars worth of goods and r is hours of leisure.How many hours per week will she work?

If Abishag owns 16 quinces and 15 kumquats and if the price of kumquats is 4 times the price of quinces, how many kumquats can she afford if she buys as many kumquats as she can?

Is it ever possible that if someone is a net seller of a good, and the price of the good he sells falls, the consumer could wind up better off than he was before by switching from being a seller to being a buyer? Draw a graph to justify your answer.