8 16 Marks Suppose That There Is A Worker Who Is Deciding How Much To Work They Have A Job That Pays Them At Wage W 1 (94.14 KiB) Viewed 42 times
8 16 Marks Suppose That There Is A Worker Who Is Deciding How Much To Work They Have A Job That Pays Them At Wage W 2 (11.75 KiB) Viewed 42 times
8. (16 marks) Suppose that there is a worker who is deciding how much to work. They have a job that pays them at wage w and they can choose how many hours that they want to work. a) (4 marks) The decision maker values dollars of consumption as c3 and has a linear dislike of labor provision. Thus, the decision maker chooses & to maximize (wl) ³ - l Find the which solves the decision maker's problem, treating w as a constant. b) (6 marks) Suppose that now the decision maker is now faced with a labor tax of 7 (where 0 ≤ T < 1), so their take-home pay is only (17)wl. Find the value of that maximizes ((1-7) wl) ³ - l, treating both w and 7 as constants in the maximization problem. Does a higher value of T lead to higher or lower l? c) (6 marks) Suppose now that the decision maker faces a "poll tax" of T that does not depend on their earnings, so their take-home pay is only wl-T.¹ Find the value of l that maximizes (wl - T) ³ - l,
treating both w and T as constants in the maximization problem. Does a higher value of T lead to higher or lower l?
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