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

Question 7

Multiple Choice

Patience has a utility function U(c1, c2) =c1/21 +.080c1/22, where c1 is her consumption in period 1 and c2 is her consumption in period 2.Her income in period 1 is 3 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) 0.75
B) 0.13
C) 0.25
D) 0
E) 0.38

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