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

question 1

Multiple Choice

Patience has a utility function U(c₁, c₂) = c^1/2₁ +.087c^1/2₂, where c₁ is her consumption in period 1 and c₂ is her consumption in period 2.Her income in period 1 is 2 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
• B)0.08
• C)0.30
• D)0.15
• E)0.23

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Definitions:

Frontal

Pertaining to the frontal plane, which divides the body into anterior and posterior sections, or relating to the frontal lobe of the brain.

Anterior Fontanel

The largest and most noticeable soft spot on a baby's skull, allowing for brain growth and situated at the junction of the frontal and parietal bones.

Lambdoid Sutures

The serrated joints connecting the parietal bones with the occipital bone in the skull, resembling the Greek letter lambda.