6. Jalapeno Jack is a maximizing worker with preferences U = ZF who has non-labour income of $60 and is paid a wage of $5 per hour. If he joins a union, he will be paid a wage of $20 per hour. a. Provide a labelled Indifference Curve diagram and supplementary calculations to illustrate and quantify the Income and Substitution Effects for this wage increase. Calculate and show Bundles "A", "B" and "C", the slopes and intercepts for the Budget Lines and the Compensated Budget Line. b. Circle True or False: Jack thinks that leisure is an inferior good. C. The maximum membership fee that Jack would pay to join this union is

6. Jalapeno Jack is a maximizing worker with preferences U = ZF who has non-labour income of $60 and is paid a wage of $5 per hour. If he joins a union, he will be paid a wage of $20 per hour. a. Provide a labelled Indifference Curve diagram and supplementary calculations to illustrate and quantify the Income and Substitution Effects for this wage increase. Calculate and show Bundles "A", "B" and "C", the slopes and intercepts for the Budget Lines and the Compensated Budget Line. b. Circle True or False: Jack thinks that leisure is an inferior good. C. The maximum membership fee that Jack would pay to join this union is

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.8P

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