Problem
• In the Robinson Crusoe economic model, Robinson plays the role of both consumer and producer. Robinson can either consume leisure or producing coconuts. The more time he spent on leisure the less time he has to produce coconuts.
o Measuring labour on the horizontal axis and coconuts on the vertical axis. Use a production function and indifference map to illustrate how much Robinson will work and how much he will consume in this economy.
o Suppose RC behave entirely as a producer and ad set up a profit-maximizing firm where the price of a coconut is $1, RC wage rate is w and coconut output level is C. i. Write an equation that represents RC's firm's profit.ii. What is the equation of the isoprofit line of this firm?iii. Interpreting the slope and intercept of the isoprofit line.iv. Using the production function and isoprofit lines illustrate the profit maximization equilibrium of RC's firm. (all slope and intercepts must be labeled)