2. An individual has an intertemporal utility function that is rational,monotonic, and strictly convex. She can borrow/lend at the interest rate, r,but does not have access to human capital. She is currently consuming abundle such that MRSx₁x2 >1+r. How many of the following statementsCOULD BE true? [HINT: try drawing a picture]0X1x2The bundle is optimal (i.e. maximizes her utility).If the individual is consuming both goods, she could do betterby consuming less today and consuming more tomorrow.She is at a corner solution in which she only consumestomorrow.a. 1b. 2c.3V.d. None of the above statements could be true.

The intertemporal utility function means the consumption is distributed between present and future.…

An individual has an intertemporal utility functi monotonic, and strictly convex. She can borrow/lend at the interest rate, r, but does not have access to human capital. She is currently consuming a bundle such that MRS×₁x2 >1+r. How many of the following statements COULD BE true? [HINT: try drawing a picture] 0 0 0 The bundle is optimal (i.e. maximizes her utility). X If the individual is consuming both goods, she could do better by consuming less today and consuming more tomorrow. She is at a corner solution in which she only consumes tomorrow.

An individual has an intertemporal utility functi monotonic, and strictly convex. She can borrow/lend at the interest rate, r, but does not have access to human capital. She is currently consuming a bundle such that MRS×₁x2 >1+r. How many of the following statements COULD BE true? [HINT: try drawing a picture] 0 0 0 The bundle is optimal (i.e. maximizes her utility). X If the individual is consuming both goods, she could do better by consuming less today and consuming more tomorrow. She is at a corner solution in which she only consumes tomorrow.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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