Harvey Habit Has a Utility Function U(c₁, C₂) = Min{c₁

question 29

Multiple Choice

Harvey Habit has a utility function U(c₁, c₂) = min{c₁, c₂}. If he had an income of $1,230 in period 1 and $615 in period 2 and if the interest rate were 0.05, how much would Harvey choose to spend on bread in period 1?

• A) $1,860
• B) $465
• C) $1,395
• D) $310
• E) $930

Articulate the reasons for wage differences among different job types and industries.

Understand the effects of minimum wage laws on employment and labor supply.

Differentiate between the human-capital and signaling theories of education.

Explain the factors contributing to the earnings gap between individuals with different levels of education.