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MGEC58H3 Study Guide - Final Guide: Utility, Becquerel, Random Variable

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greygoat862
13 Dec 2018
School
UTSC
Department
Economics for Management Studies
Course
MGEC58H3
Professor
Harry Krashinsky

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Document Summary

Consider a worker who has the following utility function: U = y c(e) where y represents his income, and c(e) is a cost function with respect to the amount of effort he expends at work. The manager that employs the worker has a profit function that is defined as follows: q = e. When answering the questions below, please use all of the information above. Suppose that c(e) = e2/2, and that the firm only wants to maximize its own profits, while. Now suppose that we constrain a = 0 (the firm neither pays a worker to simply show (a) adjusting the parameter a to make sure that the worker"s overall utility is not less than zero. Determine the values of (a,b) in this case, and the worker"s utility and effort, and the firm"s output and profits. (b) up , nor does it charge them a fee to work).

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Related Questions

Suppose the output per effective worker is production function is y=10k1/2, where k equals the amount of capital per effective worker and the capital lasts an average of 10 years. Assume that the saving rate is 32 percent, the rate of growth of population is 4 percent and the rate of technological growth is 2 percent.

a) Solve for the steady state levels of capital per effective worker, output per effective worker, investment per effective worker and consumption per effective worker.

b) Calculate the growth rate of total capital income and the growth rate of total labor income at the steady state.(Hint: Capital and labor each earn a constant share of the economy's income ).

c) Prove, at the steady state, (i) the capital-output ratio is constant;(ii) the real wage grows at the rate of 2 percent.

d) Calculate all of the following at their Golden Rule levels: Capital per effective worker, output per effective worker, saving and investment per effective worker, and the consumption per effective worker.

e) Whether the saving rate is too high or too low?

A firm faces a demand function given by P=a-bQ and has the total cost function: TC=c+dQ-eQ^2+Q^3
 
A) explain what type of firm described above and why.
B) explain the time frame within the firm is operating.
c) determine the level of output that will maximize profits.

There exist two types of workers in the market, distinguished by some characteristic that has no relationship to labor market productivity. There are 100 types of 1 worker and 100 types of 2 workers. The productivity per hour worked of each type is equal to 2. The product price is fixed at p = 2. Each type of worker has the same labor supply function as in the previous problem, that is hi =1 + wi.

(a) Assume that the labor market is inhabited by a monopsonist. The monopsonist's production function is q = H1+ H2. The objective of the monopsonist is to maximize his utility, which is given by u = p(H1 + H2) - H2 - w1H1 - w2H2, where Hi= 100(1 + wi).

The term -H2 in the utility function of the monopsonist reflects a distaste for having employees of type 2. What are the monopsonist's utility-maximizing choices of w1 and w2?

(b) Say that the labor market becomes competitive in the following sense. Other firms enter the market that is simply profit-maximizers, that is, they have no distaste for hiring type 2 workers. What happens to the wage of type 1 and type 2 workers? What happens to the welfare of the (former) discriminatory monopsonist if he is obligated to offer employment to any individual willing to supply hours to the firm (that is, whether they are type 1 or type 2) at the competitive wage rates prevailing in the labor market?