An investor with an initial endowment of $ 16,000 is confronted with the following productivity curve: C1= 240 (16,000 - C0)^0.5where C0 denotes consumption at present, and C1 consumption in the future. Assume the interest rate (for borrowing and lending) is 20%. The investor's utility function, from which it is possible to derive his indifference curves, is defined as: U(C0,C1) =C0C1How much will the investor invest in production? A)$16,000 B)$0 C)$10,000 D)$12,000 An investor with an initial endowment of $ 16,000 is confronted with the following productivity curve:C₁= 240 (16,000 -Co)0.5where Co denotes consumption at present, and C₁ consumption in the future. Assume the interest rate (for borrowing and lending) is20%. The investor's utility function, from which it is possible to derive his indifference curves, is defined as:U(CO, C₁)=C0C1How much will the investor invest in production?$16,000$0$10,000$12,000

Initial endownment = $16000Interest rate (r) = 20% or 0.2

Answered: An investor with an initial endowment…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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An investor with an initial endowment of $ 16,000 is confronted with the following productivity curve: C1= 240 (16,000 - C0)^0.5

where C0 denotes consumption at present, and C1 consumption in the future. Assume the interest rate (for borrowing and lending) is 20%. The investor's utility function, from which it is possible to derive his indifference curves, is defined as: U(C0,C1) =C0C1

How much will the investor invest in production?

A)$16,000

B)$0

C)$10,000

D)$12,000

An investor with an initial endowment of $ 16,000 is confronted with the following productivity curve:
C₁= 240 (16,000 -Co)0.5
where Co denotes consumption at present, and C₁ consumption in the future. Assume the interest rate (for borrowing and lending) is
20%. The investor's utility function, from which it is possible to derive his indifference curves, is defined as:
U(CO, C₁)=C0C1
How much will the investor invest in production?
$16,000
$0
$10,000
$12,000

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