Harvey Habit in Problem 9 Has a Utility Function U(c₁

question 12

Multiple Choice

Harvey Habit in Problem 9 has a utility function U(c₁, c₂) = min{c₁, c₂}. If he had an income of $645 in period 1 and $1,290 in period 2 and if the interest rate were 15%, how much would Harvey choose to spend on bread in period 1?

• A) $1,417.50
• B) $315
• C) $1,890
• D) $472.50
• E) $945

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Definitions:

Purchase Decision

The process by which a consumer decides to buy a product or service, influenced by factors such as need, desire, and the perceived value of the item.

Ultimate Consumer

The end user of a product or service, who purchases and uses goods and services for personal use rather than for resale or production.

Increase Profitability

Strategies or actions aimed at enhancing a company's financial gains by increasing revenue, reducing costs, or both.

Operate Efficiently

The ability of an organization to maximize outputs while minimizing inputs and waste.