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

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 $147 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 $102.
B) Harvey will borrow $40.
C) Harvey will neither borrow nor lend.
D) Harvey will save $40.
E) None of the above.