Patience Has a Utility Function U(c₁, C₂) , Where

question 6

Multiple Choice

Patience has a utility function U(c₁, c₂) , where c₁ is her consumption in period 1 and c₂ is her consumption in period 2. Her income in period 1 is 5 times 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) 0.75
• B) 0
• C) 0.08
• D) 0.15
• E) 0.23

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Definitions:

TR > TC

A situation where total revenue (TR) is greater than total costs (TC), indicating a company is making a profit from its operations.

Short Run

A period in which at least one of a firm's inputs is fixed, limiting its capacity to adjust its output levels.

Long Run

A period of time in which all factors of production and costs are variable, allowing firms to adjust all inputs.

Marginal Cost

The cost of producing one additional unit of a good or service.