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Nora's utility function is given by U=ln(C)+ln(L), where U is utility, C is consumption, and L is
leisure. The total time Nora has is T=1 and is a utility maximizer. Before the Covic pandemic, the
wage rate is 10 , and Nora has no non-labor income. When the pandemic hit and part of the
economy was locked down, Norats decreased to 8 . However, the government provided income
support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has a total
amount of time T=1 for leisure and work during the pandemic. Which of the following statements is
correct? Before the pandemic, Nora's labor supply is 0.2 . Before the pandemic, Nora spent time
equal to 0.2 on leisure. Before the pandemic, Nora's consumption was 9 . During the pandemic,
Nora's labor supply is 0.5 . During the pandemic, Nora was better off for having a higher utility
level. During the pandemic, Nora's labor supply is unchanged becauses income effects were
perfectly offset by the substitution effect from the wage drop.

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Noras utility function is given by UlnC+lnL where U i.pdf

  • 1. Nora's utility function is given by U=ln(C)+ln(L), where U is utility, C is consumption, and L is leisure. The total time Nora has is T=1 and is a utility maximizer. Before the Covic pandemic, the wage rate is 10 , and Nora has no non-labor income. When the pandemic hit and part of the economy was locked down, Norats decreased to 8 . However, the government provided income support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has a total amount of time T=1 for leisure and work during the pandemic. Which of the following statements is correct? Before the pandemic, Nora's labor supply is 0.2 . Before the pandemic, Nora spent time equal to 0.2 on leisure. Before the pandemic, Nora's consumption was 9 . During the pandemic, Nora's labor supply is 0.5 . During the pandemic, Nora was better off for having a higher utility level. During the pandemic, Nora's labor supply is unchanged becauses income effects were perfectly offset by the substitution effect from the wage drop.