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

question 19

Multiple Choice

Harvey Habit in Problem 9 has a utility function U(c₁, c₂) = min{c₁, c₂}. If he had an income of $420 in period 1 and $1,050 in period 2 and if the interest rate were 10%, how much would Harvey choose to spend on bread in period 1?

• A) $240
• B) $360
• C) $1,440
• D) $1,080
• E) $720

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Definitions:

Flavor

A complex combination of the sensory experiences of taste, smell, and, sometimes, mouthfeel, which contribute to the perception of food or other substances.

Sauce Béarnaise

A classic French sauce made from clarified butter emulsified in egg yolks and flavored with herbs, usually served with steak.

Conditioned Response

A learned response to a previously neutral stimulus after it has been repeatedly paired with an unconditioned stimulus.

Seligman

A psychologist known for his work on learned helplessness, positive psychology, and well-being.