Samantha Smoothie's Utility Function Is U(c₁, C₂)= C₁c₂, Where C₁

question 29

Multiple Choice

Samantha Smoothie's utility function is U(c₁, c₂) = c₁c₂, where c₁ is her consumption in period 1 and c₂ is her consumption in period 2.She earns $200 in period 1 and $220 in period 2.Samantha can borrow and lend at an interest rate of 10% and there is no inflation.The number of dollars that Samantha spends in the second period must be

• A)more than 200 but less than 220.
• B)exactly 220.
• C)more than 220.
• D)exactly 200.
• E)less than 200.

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Definitions:

Old Equipment

Machinery or tools that have been used for a long period and may be outdated or less efficient compared to newer versions.

Calculate

Calculate involves using mathematical or statistical methods to determine or assess a particular value, quantity, or outcome based on given data or parameters.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision.

Relevant Costs

Costs that should be considered when making decisions, characterized by their occurrence in the future and variability depending on the decision made.