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AlexFokin [52]
3 years ago
14

Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 100) * (L – 40). This utility function impli

es that Shelly’s marginal utility of leisure is C – 100 and her marginal utility of consumption is L – 40. There are 110 (non-sleeping) hours in the week available to split between work and leisure. Shelly earns $10 per hour after taxes. She also receives $320 worth of welfare benefits each week regardless of how much she works.
(a) Graph Shelly's budget line.
(b) What is Shelly's marginal rate of substitution when L=100 and she is one her budget line?
(c) What is Shelly's reservation wage?
(d) Find Shelly's optimal amount of consumption and leisure.
Business
1 answer:
ludmilkaskok [199]3 years ago
4 0

Answer:

Explanation:

U(C, L) = (C – 100) × (L – 40)

(a) C = (w - t)[110 - L] + 320

C = 10[110 - L] + 320

C + 10L = 1420

where,

C- consumption

w - wages

t - taxes

L - Leisure

(b) Given that,

L = 100 then,

C = 420

MRS=\frac{MU_{L} }{MU_{C} }

MRS=\frac{C-100 }{L-40}

MRS=\frac{320}{60}

              = 5.33

(c) L = 110

C = 320

Reservation wage:

MRS=\frac{C-100 }{L-40}

MRS=\frac{220}{70}

= 3.14

(d) At optimal level,

\frac{C-100}{L-40}=\frac{10}{1}

C - 100 = 10L - 400

C - 10L = -300

C = 10L - 300

Using budget constraint:

C + 10L = 1420

10L - 300 + 10L = 1420

20L = 1720

L* = 86 and C* = 560

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However, personal expenses DO NOT CONTRIBUTE to an individual's Itemized deduction and as such, MIKE HANSEN'S ITEMIZED DEDUCTION IS ZERO.

The $6000 incurred is classed under personal expenditure and is not deductible.

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3 years ago
Roberts Supply, Inc. provides the following data taken from its third quarter budget: Sep $83,000 $67,000 $59,000 Jul Aug ter Ca
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Answer:

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We can easily calculate the cash balance as at 30 september with the help of accounting equation given below.

Closing Balance = Opening balance + Cash collections- Cash payments

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                            = 1000$

* It include sum of all capital expenditures, operating expenses and purchases of direct material.

5 0
3 years ago
American Inc. had gross sales of $925,000. Cost of goods sold and selling expenses were $490,00 and $220, 000 respectively Ameri
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Answer:

a. Particulars                                Amount

Gross sales                                  $925,000

Less: COGS                                 <u>$490,000</u>

EBITDA                                        $435,000

Less: Depreciation                      <u>$120,000</u>

EBIT                                              $315,000

Less: Interest on notes payable <u>$8,800   </u>  (220000*4%)

EBT                                               $306,200

Less: Tax (35%*306200)             <u>$107,170</u>

Net Income                                   <u>$199,030</u>

<u />

b. Operating cash flow = Net income + Depreciation

Operating cash flow = $199,030 + $120,000

Operating cash flow = $319,030

6 0
2 years ago
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1. The calculation of the predetermined overhead rate applied to jobs during August is <u>75% of direct labor costs</u> ($90,000/$120,000).

2. The balance in the Work in Process account at the end of August is $61,000.

3. The amounts of direct material cost and applied overhead recorded for Job 248 as of August 31 are $19,000 and $18,000, respectively.

<h3>Data and Calculations:</h3>

Work In Process Balance, August 1 $ 41,000

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Direct labor 120,000

Manufacturing overhead applied (based on direct labor cost) 90,000

Total costs incurred = $326,000

<h3>Finished Jobs during August: </h3>

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234               $ 58,000

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7 0
2 years ago
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Answer:

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3 soda: 2 utils

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2 soda:  3 utils

3 soda: 2 utils

Highlighted are the ones we must get to get the maximum utility.

The maximum utility is 5 utils +4 utils+4 utils+3 utils= 16 utils

6 0
2 years ago
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