Special agent Jack Bauer works for the Counter Terrorist Unit (CTU). On one of the longest...

 

Transcribed Image Text:

Special agent Jack Bauer works for the Counter Terrorist Unit (CTU). On one of the longest day of his life, he is tasked to find and catch a terrorist plotting to cause mayhem in the city. He also needs to take care of his clueless daughter, Kim Bauer. Since his wife is no longer with him, the time he spends with his daughter is precious. He uses his pay check fro his CTU office to purchase Red Bull so that he has strength to get through his day. Suppose that CTU wage rate per hour is $100 and the price of a can of Red Bull is $5. Also let T be the number of hours he spends with his daughter and C be the amount of Red Bull he consumes. His preferences are well-behaved. (a) Draw agent Bauer's budget line in T-C space (b) If the optimal choice of Jack Bauer is to spend 18 hours with his daughter, how much Red Bull will he consumes? How many hours he decides to work? (c) If the wage rate increases to $120 and Mr. Bauer decided to work, says, 12 hours for CTU, show the income and the substitution effect of the change in the wage rate on his time allocation. (d) Now CTU is more generous and increases the wage rate to $200. However, agent Bauer thinks he needs more time with his daughter and decides to work for CTU just 10 hours. Show the income and the substitution effect on his time allocation. (e) Graph agent Bauer's labour supply curve. Special agent Jack Bauer works for the Counter Terrorist Unit (CTU). On one of the longest day of his life, he is tasked to find and catch a terrorist plotting to cause mayhem in the city. He also needs to take care of his clueless daughter, Kim Bauer. Since his wife is no longer with him, the time he spends with his daughter is precious. He uses his pay check fro his CTU office to purchase Red Bull so that he has strength to get through his day. Suppose that CTU wage rate per hour is $100 and the price of a can of Red Bull is $5. Also let T be the number of hours he spends with his daughter and C be the amount of Red Bull he consumes. His preferences are well-behaved. (a) Draw agent Bauer's budget line in T-C space (b) If the optimal choice of Jack Bauer is to spend 18 hours with his daughter, how much Red Bull will he consumes? How many hours he decides to work? (c) If the wage rate increases to $120 and Mr. Bauer decided to work, says, 12 hours for CTU, show the income and the substitution effect of the change in the wage rate on his time allocation. (d) Now CTU is more generous and increases the wage rate to $200. However, agent Bauer thinks he needs more time with his daughter and decides to work for CTU just 10 hours. Show the income and the substitution effect on his time allocation. (e) Graph agent Bauer's labour supply curve.

Answer rating: 100% (QA)

a In the diagram below XAxis is the No of Red Bulls Bought and Consumed from Pay Check YAxis is the ... View the full answer