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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 righthand side is the consumption, and the lefthand side is the endowment as a sum of nonlabor and labor income. from (2) C=1848R (3) plug (3) into (1) Max (1848R)*R FOC dU/dR = 18416R=0 R=184/16 Plug R in (3) C=184(18/16) =92...
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This note was uploaded on 01/26/2010 for the course ECONOMICS EC212 taught by Professor Yu during the Spring '08 term at Mt. Holyoke.
 Spring '08
 Yu
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