ECON 302 Midterm: ECON302 Midterm 21 Spring 2009 solution
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Instructions: this is closed book, closed notes exam, no calculators of any kind are allowed, show all the calculations, if you need more space, use the back of the page, fully label all graphs. Consider the classical model studied in class, and briefly described as follows. The consumer derives utility from consumption c and leisure l according to. He is endowed with h hours which he can lcu ln) ln. The real wage is w. the consumer owns a allocate between leisure and work firm and receives dividend income (profit) . Ak technology capital owned by the firm, and dl is labor employed by the firm. The government taxes labor income at the rate of wt. , where a is productivity parameter (tfp), k is the and dividend income at the rate of t: (5 points). For finding the demand it is convenient to rewrite the budget constraint as follows: wc.
