Question

2. For the closed-economy, one-period model, suppose that U(C,) = min(C,Bl. and F(K, N) 0K+5N, where β > 0, α > 0, and δ > 0, Determine con- sumption, employment, output, leisure, and the real wage in a competitive equi- librium, and explain your solutions. Also draw a diagram with the consumers preferences and the production possibilities frontier, and show the competitive equilibrium in this diagram.

Answer 1