Harvey Habit Has a Utility Function U(c₁, C₂)=min{c₁, C₂}, Where

question 11

Multiple Choice

Harvey Habit has a utility function U(c₁, c₂) =min{c₁, c₂}, where c₁ and c₂ are his consumption in periods 1 and 2 respectively.Harvey earns $189 in period 1 and he will earn $63 in period 2.Harvey can borrow or lend at an interest rate of 10%.There is no inflation.

• A)Harvey will save $60.
• B)Harvey will borrow $60.
• C)Harvey will neither borrow nor lend.
• D)Harvey will save $124.
• E)None of the above.

---

Definitions:

Entity Theorists

Individuals who believe that personal qualities such as intelligence and talent are fixed and unchangeable.

Incremental Theorists

Individuals who believe that abilities can be developed through dedication and hard work, emphasizing growth and learning.

Fundamental Attribution Error

A bias in social psychology where individuals overestimate the role of dispositional factors and underestimate situational factors in explaining other people's behavior.

Dispositional Explanations

An approach to explaining behavior by attributing it to internal traits or personality factors of the individual.