Exam 2: Economists View of Behavior

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O'Roberts receives a cash prize of $3,000 and is trying to decide how much money to invest at an interest rate of 5% and how much to spend now. Consider his intertemporal budget constraint where future interest income is measured on the vertical axis. If the interest rate were 7% instead, his budget constraint would:

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Marginal costs:

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Susan Chen is a stock analyst. She values two goods: money (income) and her integrity. Her bonus is based on the number of investments she recommends to the company. Generally speaking, the greater the level of bonus she will receive:

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