Samantha Smoothie's Utility Function Is U(c₁, C₂) = C₁c₂, Where

question 2

Multiple Choice

Samantha Smoothie's utility function is U(c₁, c₂) = c₁c₂, where c₁ is her consumption in period 1 and c₂ is her consumption in period 2. She earns $200 in period 1 and $220 in period 2. Samantha can borrow and lend at an interest rate of 10% and there is no inflation. The number of dollars that Samantha spends in the second period must be

• A) more than 200 but less than 220.
• B) exactly 220.
• C) more than 220.
• D) exactly 200.
• E) less than 200.

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Definitions:

Homeostasis

The natural tendency of the body to maintain a balanced internal state in order to ensure physical survival.

Intrinsic

Refers to motivation or value that is driven by an interest or enjoyment in the task itself, rather than relying on external pressures or rewards.

Extrinsic

Originating from or influenced by external factors outside of oneself, such as rewards or social pressures, rather than internal desires.

Instinct

Instinct refers to the innate, typically fixed patterns of behavior in animals and humans that are responded to specific stimuli, driven by evolutionary pressures.