Econ450sp15 Assignment 5 answers - Econ450SP15 Assignment 5 Name_Answers A potential welfare recipient has 8640 hours in a year which she can use for

# Econ450sp15 Assignment 5 answers - Econ450SP15 Assignment 5...

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Econ450SP15 Assignment 5 Name__Answers________ A potential welfare recipient has 8640 hours in a year which she can use for leisure (R hours) or working (L hours), therefore R+L=8640. She earns \$12 per hour at her new minimum wage job (after payroll taxes) and she can work as many hours per year as she likes. She has no other income so her budget constraint is \$12 C L B , where C is her consumption of market goods per year and B is her annual cash welfare benefit (if any). She has a utility function 2 7 9 9 U C R where R is her leisure hours per year. For this utility function, her MWTP for leisure (the slope of her indifference curve) is 7 2 C R . You will need to use a scientific calculator to compute some of the following answers. 1) If she does not receive welfare, how many hours per monthyear does she work? Answer:___ 1920 _ (set MWTP=12 and solve using C=12(8640-R) _____ 2) How much does she consume per year ? Answer:___ \$23,040 _____________________________ 3) What is her annual utility level?

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