Suppose a Consumer's Utility Function Is U(F₀,F₁)= F₀⁰

question 35

Multiple Choice

Suppose a consumer's utility function is U(F₀,F₁) = F₀^0.5F₁^0.5,where F₀ represents food consumed this year and F₁ represents food consumed next year.For that utility function,the marginal utility of food consumed this year is 0.5 × (F₁/F₀) ^0.5 and the marginal utility of food consumed next year is 0.5 × (F₀/F₁) ^0.5.Suppose the consumer earns $100 this year and nothing in the next,food costs $1 per unit in both years,and the interest rate is 10%.How much food does she consume this year,and how much does consume tomorrow?

• A) She consumes 45 units of food this year and 55 units of food next year.
• B) She consumes 50 units of food this year and 50 units of food next year.
• C) She consumes 55 units of food this year and 50 units of food next year.
• D) She consumes 50 units of food this year and 55 units of food next year.

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