1.1 Suppose that Cookie Monster's production function is given by zF( K, Nd) = z (KNd)^1/2, with z = 16 and K = 1/16 . Suppose also that w = 1. Write his profit maximization problem, find optimal labor demand N d * and compute the maximized profit ? * .

1.2. Suppose that Cookie Monster's utility function is given by u(C, l) = C + 4 (l + 2)^1/2. Given w and ? * found in part 1.1, h = 16 and G = T = 2, write his utility maximization problem and find his optimal consumption bundle C * and l * .

1.3. Write the production possibility frontier as a function of l.

1.4. Would the labor market clear with the labor demand and supply found in part 1.1 and part 1.2? Justify. If not, is w too high or too low? In which direction does the labor market push w?

1.5. Compute the equilibrium (Hint: You may start from labor market clearing condition then find numerical values for w, N d , N s , Y , l, ?, C)

1 One-Period Model 1. 'k 3 Suppose that Cookie Monster's pro- duction function is given by 217 (K, Nd) :7, mad, 1 with z = 16 and K = Er Suppose also that w = 1. Write his prot maximization problem, nd op- timal labor demand Nd" and compute the maxi mized prot 71:". 2. 'k 3 Suppose that Cookie Monster's utility function is given by \"(0, I)=C+4\\/1+2' Given an and it" found in item 1, h = 16 and G = T = 2, write his utility maximization problem and nd his optimal consumption bundle C\" and I'. 3. 'k 5 Write the production possibility fron tier as a function of 1. 4.. ** m Would the labor market clear with the labor demand and supply found in items 1 and 2? Justify. If not, is w too high or too low? In which direction does the labor market push in? 5. *iir Compute the equilibrium (Hint: You may start from labor market clearing condition then nd numerical values for m, N\