micro-ex-10

micro-ex-10 - Ani Guerdjikova Department of Economics...

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Ani Guerdjikova Fall 2006 Department of Economics Intermediate Microeconomics Cornell University ECON 313 Problem Set 10 Problem 39 (Robinson-Crusoe economy) In year 2222 , Luna lands on the uninhabited planet Micron. Luckily, her spaceship is equiped with a cookie-machine which produces cookies c using labor l as input. The production function is given by: f ( l )= ½ 1 16 l 2 ,f ü r 0 l 12 9 ü r l> 12 . Luna expects help to arrive only in 12 space years. Right now, her supplies of cookies are ex- hausted. Hence, her initial endowment consists of 12 space years and 0 cookies. Luna maximizes her utility from leisure f =12 l and cookies c. Her utility function is U ( f ; k fk. The price of cookies is p , the wage is normalized at w =1 . Luna owns the cookie-machine and hence receives the profits from the cookie-production. a) Draw the production function of the cookie-machine in a diagram. Derive the profit-maximization problem and determine the optimal production plan (demand for labor and supply of cookies).
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This homework help was uploaded on 04/17/2008 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell.

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micro-ex-10 - Ani Guerdjikova Department of Economics...

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