FENOMENE 222205 Fol gall po BESTANDEN Alexa is trying to decide whether to fly or drive to California. If she drives, she will forego a day's pay because she is an hourly worker without vacation pay. Which of the terms below would be used to best describe this cost? O Future cost O Differential cost O Sunk cost O Opportunity cost

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For questions 5-6, please classify the costs of each of the following as variable, fixed, mixed, or step. Sales volume is the cost driver. 5. Real estate taxes A) Variable В) Fixed C) Mixed D) Step Your answer is Explain your answer: 6. Electric power in a factory A) Variable B) Fixed с) Mixed D) Step Your answer is Explain your answer:

Q7: An individual lives for only two periods and has preferences given by the follow- ing intertemporal utility function: U = Ing₁ +aln(1 -h₁) + [Inc₂+aln(1 - h₂)] (1) where, c₁, c₂ denotes consumption in period 1 and period 2 respectively h₁, h₂ denote the labour supply in period 1 and 2 respectively. Therefore 1-h is the amount of leisure time in period 1. The term 3 is the discount factor. The problem of the individual at period 1 is to choose consumption in both periods and labour supply in both periods subject to the following budget constraints: +8= wh and c₂= w₂h₂ + (1+r)s where s denote the saving, w denotes the wates and r denotes the real interest rate. (a) Provide an economic interpretation of the two budget constraints written above. (b) Combine the two budget constraints written above and prove the economic interpretation of of life time budget constraint. (c) Set the Lagrangean function and find the first order conditions with respect to C₁ C₂, hi and h₂. (d) Find the…