ECON 302 Midterm: ECON302 Midterm 2 Fall 2014 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. l. He is endowed with h hours which he can: (50 points). Consider the classical model studied in class, and briefly described as follows. The consumer derives utility from consumption c and leisure l according to allocate between leisure and work sl . The real wage is w. the consumer owns a firm and receives dividend income (profit) . The firm produces output y using technology capital owned by the firm, and dl is labor employed by the firm. The government taxes labor income at the rate of wt of t. , where a is productivity parameter (tfp), k is the and dividend income at the rate. Y: write the consumer"s utility maximization problem.
