Chapter 4
Consumer and Firm Behavior: The Work-Leisure Decision
and Profit Maximazation

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Figure 4.1  Indifference Curves

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Figure 4.2  Properties of Indifference Curves

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Figure 4.3  Representative Consumer's Budget Constraint (T > p)

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Figure 4.4  Representative Consumer's Budget Constraint (T < p)

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Figure 4.5  Consumer Optimization

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Figure 4.6  The Representative Consumer Chooses Not to Work

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Figure 4.7  An Increase p – T for the Consumer

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Figure 4.8  Increase in the Real Wage Rate—Income and Substitution Effects

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Figure 4.9  Labor Supply Curve

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Figure 4.10  Effect of an Increase in Dividend Income or a Decrease in Taxes

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Figure 4.11  Perfect Complements

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Figure 4.12  Real Wage in the United States, 1980–2003

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Figure 4.13  Average Weekly Hours in the United States, 1980–2003

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Figure 4.14  Production Function, Fixing the Quantity of Capital and Varying the Quantity of Labor

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Figure 4.15  Production Function, Fixing the Quantity of Labor and Varying the Quantity of Capital

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Figure 4.16  Marginal Product of Labor Schedule for the Representative Firm

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Figure 4.17  Adding Capital Increases the Marginal Product of Labor

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Figure 4.18  Total Factor Productivity Increases

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Figure 4.19  Effect of an Increase in Total Factor Productivity on the Marginal Product of Labor

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Figure 4.20  The Solow Residual for the United States

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Figure 4.21  Revenue, Variable Costs, and Profit Maximization

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Figure 4.22  The Marginal Product of Labor Curve Is the Labor Demand Curve of the Profit-Maximizing
Firm