Patience Has a Utility Function , Where C₁ Is

question 60

Multiple Choice

Patience has a utility function , where c₁ is her consumption in period 1 and c₂ is her consumption in period 2. Her income in period 1 is twice as large as her income in period 2. At what interest rate will she choose to consume the same amount in period 1 as in period 2?

• A) 0.40
• B) 0.10
• C) 0.20
• D) 0
• E) 0.30

---

Definitions:

Total Revenue

The overall amount of money generated from sales of goods or services before any expenses are subtracted.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the overall financial gain of a business.

Own Capital

Refers to the funds or resources that a business owner personally invests in their enterprise, as opposed to borrowed capital.

Fixed Factor

An input to the production process that cannot be easily increased or decreased in the short term.