Exam 8: Buying and Selling-Part A

Henri is paid $9 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 Henri and he is currently working some overtime.If his hourly wage for the first 40 hours per week that he works rises to $11 and his wages for overtime remain at $15 per hour, he will choose to work

If someone has a Cobb-Douglas utility function and no income from any source other than labor earnings, then an increase in wages will not change the amount that person chooses to work.

Wendy and Mac work in fast-food restaurants.Wendy is paid $4 an hour for the first 40 hours a week that she works and $6 an hour for every hour beyond 40 hours per week.Mac gets $5 an hour no matter how many hours he works.Each has 110 hours per week to allocate between work and leisure.Each has a utility function U = cr, where c is expenditure per week on consumption and r is hours of leisure per week.Each can choose the number of hours to work.If Wendy works W hours and Mac works M hours, then

Ernie's wage rate is $10 an hour.He has no earnings other than his labor income.His utility function is U(C, L)= CR², where C is the amount of money he spends on consumption, and R is the number of hours a day he spends not working. a.Write an equation that describes Ernie's budget constraint. b.How many hours does Ernie choose to work per day? c.How much money does he spend on consumption per day?

Holly consumes commodities x and y and her utility function is U(x, y)= xy⁵.Good x costs $2 per unit and good y costs $1 per unit.If she is endowed with 7 units of x and 4 units of y, how many units of good y will she consume?

Albert consumes only tangerines and bananas.His only source of income is an initial endowment of 30 units of tangerines and 10 units of bananas.Albert insists on consuming tangerines and bananas in fixed proportions, 1 unit of tangerines per 1 unit of bananas.He initially faces a price of $10 per unit for each fruit.The price of tangerines rose to $30 per unit while the price of bananas stayed unchanged.After the price change, he would

Heather and Myrtle have the same tastes.Heather is paid $10 an hour and chooses to work 9 hours a day.Myrtle is paid $9 an hour for the first 8 hours she works and $18 an hour for any time she works beyond 8 hours a day.

Bill receives half of his income in wages and half of his income in dividends.Bill would be indifferent between a 50% increase in his wage rate and a 50% increase in his dividend income.

If a rational utility maximizer is a net demander of a good and if an increase in its price causes him to buy more of it, then it must be an inferior good.

May's utility function is U = C + 14D^1/22.5(H +J)², where C is dollars spent on goods other than housecleaning, D is the number of hours per day that somebody spends cleaning her house, H is the number of hours per day May spends cleaning her house, and J is the number of hours per day May spends working at her job.All May's income comes from her job.She can work as many hours a day as she wishes at a wage of $7 an hour. a.If she cannot hire anyone to do her housecleaning, how many hours will she spend on the job and how many hours will she spend housecleaning? b.If she can hire a housecleaner at $5 an hour, how many hours will she work on her job, how many hours of housecleaning will she hire, and how many hours will she clean house?

Dudley has a utility function U(C, R)= C - (12 - R)², where R is leisure and C is consumption per day.He has 16 hours per day to divide between work and leisure.If Dudley has a nonlabor income of $20 per day and is paid a wage of $0 per hour, how many hours of leisure will he choose per day?

If a person is a net supplier of a normal good and its price increases while all other prices stay the same, then his demand for the good must decrease.

Harvey's net demands for goods 1 and 2 are (2, -3)and his endowment is (6, 5). a.What are his gross demands? b.Draw a diagram illustrating his budget line, his endowment, and his consumption.(Put good 1 on the horizontal axis.) c.Draw a dotted line to show what his budget line would be if the price of good 1 doubled and the price of good 2 stayed the same.

A farmer gets 20 eggs and 10 tomatoes every week from her chickens and her tomato plants.She has no other source of income.She has convex, downward-sloping indifference curves.The current market prices are $2 per egg and $3 per tomato.At these prices she chooses the same bundle that she is endowed with (20 eggs and 10 tomatoes).

Dr.Johnson receives a lump sum payment of $100 per week.Suppose that the first $100 per week of labor income is untaxed but all labor income above $100 is taxed at a rate of 40%.

If Abishag owns 18 quinces and 5 kumquats and if the price of kumquats is 6 times the price of quinces, how many kumquats can she afford if she buys as many kumquats as she can?

Mario consumes eggplants and tomatoes in the ratio of 1 bushel of eggplants per 1 bushel of tomatoes.His garden yields 30 bushels of eggplants and 10 bushels of tomatoes.He initially faced prices of $25 per bushel for each vegetable, but the price of eggplants rose to $100 per bushel, while the price of tomatoes stayed unchanged.After the price change, he would

Is it ever possible that an increase in the price of a good for which a person is a net seller can make him worse off? Use a diagram to illustrate your answer.

If leisure is a normal good, then an increase in nonlabor income will reduce labor supply.

Les is allowed to work only 8 hours a day at his main job, although he would like to work more hours.He takes a second job.He can work as many hours as he wishes at the second job, but at a lower wage.If leisure is a normal good, then an increase in the wage rate for his first job will reduce the number of hours he chooses to work at his second job.