Patience Has a Utility Function U(c₁, C₂)= C^1/2₁

question 12

Multiple Choice

Patience has a utility function U(c₁, c₂) = c^1/2₁ + .083c^1/2₂, 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)0.10
• B)0
• C)1
• D)0.20
• E)0.30

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