Unformatted text preview: c. 112 dollars per day on consumption. d. 92 dollars per day on consumption. e. 138 dollars per day on consumption. Answer: Max U(C,R) = CR (1) s.t. C+8R=40+8*18 (2) Note: this is the budget constraint. The right-hand side is the consumption, and the left-hand side is the endowment as a sum of nonlabor and labor income. from (2) C=184-8R (3) plug (3) into (1) Max (184-8R)*R FOC dU/dR = 184-16R=0 R=184/16 Plug R in (3) C=184(1-8/16) =92...
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- Spring '08
- Utility, 18 hours, 40 dollars, 8 dollars, 92 dollars, 82 dollars