EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 13A.1, Problem 1MQ
To determine
To graph of utility maximizing choice of the individual who works for seven hours every day irrespective of wage offered to her.
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Students have asked these similar questions
a) Chika has calculated the marginal utility that she derives from her paid employment and from leisure. This is presented in table
below. In her ideal world, where she could work as few or as many hours as she wished, how would she allocate her sixteen waking
hours? (She does need to sleep.)
Hours
1
2
3
4
5
6
7
8
9
10
MU Paid
Employment
105
95
85
75
65
55
45
35
25
15
MU
Leisure
100
90
80
70
60
50
40
30
20
10
hours working and
b) Unfortunately, Chika begins to realize that unless she gets an education she will not enjoy a high salary and therefore, will not be
able to afford more leisure time. She therefore decides to spend six hours each day studying (in addition to her eight hours of sleep).
How will she now divide the remaining hours between work and leisure?
hours working and
hours leisure.
hours leisure.
Jasmine can work as much as 64 hours per week. She receives $200 per week in non-wage income. Her utility function for leisure and consumption is U(R, C) = 320R(1/2) + 2C , where R is hours of leisure and C is consumption. The price of consumption is unity.
(a) How much will Jasmine work when the wage is $20 per hour?
Dr. Farida is planning for her requirement. Suppose she can consume her salary of Rs. 100,000 while she is in service or save her salary to consume it after retirement. When she saves her salary she will get 10% interest on it. Draw Dr. Farida’s budget constraint, her indifference curve and her optimum. If interest rate goes up to 20%, draw figures to show when she will save more and when she will save less.
Chapter 13A Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
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- Winona has 80 hours to divide between leisure and labor. Her utility function is u(r,c) = f(r) + c, when r represents hours of leisure,c represents dollars of consumption, and f is strictly concave. Winona’s wage is w0= $15/hr. initially, then it rises to w1= $20/hr. (i) Explain what happens to Winona’s labor supply when the wage rises,and why. (ii) Explain how the answer to (i) would change if Winona were to win a lottery.arrow_forwardJack currently works 38 hours per week at a wage rate of $15 per hour. His marginal rate of substitution is $20 per hour. Is Jack's utility maximized? If yes, explain why. If no, explain why not and discuss what Jack should do in order to further increase utility.arrow_forwardElisha is starting a tuxedo rental business and plans to charge $80 for the first day plus an extra $30 for each day beyond the first day. Create an equation for the income Elisha will receive where I stands for total income and D is the amount of extra days.arrow_forward
- Janie works for an accounting firm. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. Before her raise, if Janie decreases her hours of work from 30 to 20 hours per week, the marginal utility gain from having more leisure is: Hours of Leisure Total Utility from Leisure Income Total Utility from Income 0 0 0 0 10 29 300 40 20 54 400 72 30 75 600 96 40 86 800 108 50 92 900 116 1200 120 1500 122 1600 124 2000 125 Question 4 options: 29 21 13 7arrow_forwardJack's marginal utility of consumption is MUc = L - 6, and the marginal utility of leisure is MUL=C-40. Jack does not have any nonlabor income, i.e., V = 0. Jack faces a $48 an hour wage rate. Jack's total number of hours available per week is 150. What is Jack's optimal choice of consumption? (calculate to 2 decimal places)arrow_forwardDoes the income level of a person change their view of substitute goods?arrow_forward
- Terry attends college and works part-time in a drug store. She can work up to 40 hours each week and is paid $9 per hour. The following table shows her utility from different levels of leisure and income. Hours of Leisure Total Utility from Leisure Marginal Utility of Leisure Work Hours Income Total Utility from Income Marginal Utility from Income 5 18 0 5 45 35 0 10 34 3.2 10 90 59 0.53 15 48 2.8 15 135 77 0.4 20 56 1.6 20 180 86 0.2 25 60 0.8 25 225 92 0.13 30 65 1 30 270 98 0.13 35 69 0.8 35 315 103 0.11 40 72 0.6 40 360 107 0.03 Terry decides to increase her work hours from 20 to 25 hours per week. What would be her marginal utility loss from having less leisure time? 6 What would be her marginal utility gain from having an additional income? 13 What will be her total utility from both leisure and income when working 25 hours…arrow_forwardWhat is the trend of the total utilityarrow_forwardTerry’s utility function over leisure (L) and other goods (Y ) is U(L, Y ) = Y + LY. The associated marginal utilities are MUY = 1 + L and MUL = Y. He purchases other goods at a price of $1, out of the income he earns from working. Show that, no matter what Terry’s wage rate, the optimal number of hours of leisure that he consumes is always the same. (a) What is the number of hours he would like to have for leisure? Determine the MRS of leisure for labour (b) Draw a leisure-influenced labor curvearrow_forward
- Terry’s utility function over leisure (L) and other goods (Y) is U (L, Y) = Y + LY. The associated marginal utilities are MUY = 1 + L and MUL = Y. He purchases other goods at a price of $1, out of the income he earns from working. Show that, no matter what Terry’s wage rate, the optimal number of hours of leisure that he consumes is always the same. (a) What is the number of hours he would like to have for leisure? (b) Determine the MRS of leisure for labour (c) Draw a leisure-influenced labor curvearrow_forwardDr. Farida is planning for her requirement. Suppose she can consume her salary of Rs. 100,000 while she is in service or save her salary to consume it after retirement. When she saves her salary she will get 10% interest on it. Draw Dr. Farida’s budget constraint, her indifference curve and her optimum. ?arrow_forwardTerry attends college and works part-time in a drug store. She can work up to 40 hours each week and is paid $9 per hour. The following table shows her utility from different levels of leisure and income. Hours of Leisure Total Utility from Leisure Marginal Utility of Leisure Work Hours Income Total Utility from Income Marginal Utility from Income 5 18 0 5 45 35 0 10 34 3.2 10 90 59 4.8 15 48 2.8 15 135 77 3.6 20 56 1.6 20 180 86 1.8 25 60 0.8 25 225 92 1.2 30 65 1 30 270 98 1.2 35 69 0.8 35 315 103 1 40 72 0.6 40 360 107 0.8 Terry decides to decrease her work hours from 20 to 10. What would be her marginal utility gain from having additional leisure time? What would be marginal utility loss from less income? What will be her total utility from both leisure and income when working 10 hours per week? Does it make sense from the…arrow_forward
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