問題詳情
4. Heterogeneity (25 points)
Consider a one-period economy with competitive markets. There are mass one households and massone firins. The firms use labor in units of working hours, n, to produce consumption goods, and theproduction function is:
where A ＞ 0 captures the productivity of firms. The housebold's utility is
where the c is the consumption, n is the working hour, and the parameter,γ ＞ O, captures theimportance of consumption to households. A household's income comes from working, and the wageper hour is denoted by w. Thus, the household's budget constraint is
c = wn.
【題組】(a) (5 points) Solve for the equilibrium consumption, c, working hours, n, and wage rate, w.