Question

Hi, can someone please help me with this Macroeconomics question? Thank you!

nomy: Consider a static, one-per Static One Period Model of the Eco iod model of the economy. There 1s a representative household who can choose how much to consume and how much to work. There is no saving since the model is static. The household problem is C,N I have dropped the t subscripts since there is only one period. Here N is hours of labor, C is consumption, D is a dividend received from ownership of the firm, and w is the real wage. The parameter θ governs the disutility from working. Higher values of θ make the household want to work less. You could also think about θ as corresponding to the utility from leisure, since if you are not working we treat that as leisure. A firm produces duction technology according to the following pro This is different than the production function in class. Here only labor is used (no capital) and there are no diminishing returns to labor. We can still analyze the problem with F(K, N)- N, but the conclusions may be different. The firm's dividend is m's objective is to pick N to maximize D: max AN -wN. Use the household (flow) budget constraint to substitute out for C in the utility function. Then use calculus to derive a first order condition characterizing optimal behavior for the household Solve this equation for N in terms of objects that the household treats as given. These may be exogenous or endogenous but treated as fixed by the household. Use calculus to derive a first order condition characterizing optimal behavior by the firm.

Answer 1

Thu sumers Problem +c FOC 2. Vi The The FOC. A.