Suppose a person's utility for leisure (L) and consumption (Y) can be expressed as U = Y + L0.5. Show what happens to the person's labor supply curve when the income tax is cut from 70 % to 30 %. Denote hours worked as H and wage per hour as w
What will be an ideal response?
Since Y = net income, U = w(1 - t)H + (24 - H)0.5. Maximizing utility with respect to hours worked, H, yields H = 24 - (2(1 - t)w)-2. Any decrease in t would increase the number of hours worked. Note: This person is a workaholic. Even at a net wage of $1, this person only relaxes for 3/4 of an hour!
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Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent. If the bank is currently holding $200,000 in reserves, the excess reserves are equal to
A) zero. B) $180,000. C) $120,000. D) $20,000.
Long-run unemployment arises from a single problem that has a single solution
a. True b. False Indicate whether the statement is true or false
Morgan lives in San Francisco and likes to dine out. Morgan has noticed that prices at restaurants near popular tourist destinations in the city tend to be higher than at restaurants of the same quality in other neighborhoods. One reason for this is that:
A. tourists don't worry about money while on vacation. B. search costs are higher for people who are unfamiliar with the area. C. residents don't like to eat in restaurants frequented by tourists. D. restaurant meals are a small fraction of the total cost of a vacation.
Because of economies of scale, some countries specialize in manufacturing a particular product (such as cars) for which the global market can only support a limited number of firms. This is a reflection of _____
Fill in the blank(s) with the appropriate word(s).