The diagram depicts Marco's choice of consumptions in periods 1 and2. He has $100 worth of grain in period 1 and no income in period 2.Marco has two choices. In scheme 1, he can sell the grain that he doesnot consume and lend the money at 10%. In scheme 2, he can investthe grain that he does not consume (e.g. planting as seed) for a returnof 50%. Which of the following statements is correct?Consumption later, $150110603900FF(lend at 10%)FF (invest at 50%)B60 68Consumption now, $100Going from scheme 1 to scheme 2, the substitution and income effects have opposite effectson period 2 consumption.Marco can do better than consumption choice B by investing all of his grain and borrowingagainst his period 2 output.O Marco is less impatient at B than at A.Marco can do better than consumption choice B by investing all of his grain and consumingthe output in period 2.

Marco has $100 worth of grain in period 1 and no pay in period 2. He needs to augment his…

diagram depicts Marco ice of consumptions in periods 2. He has $100 worth of grain in period 1 and no income in period 2. Marco has two choices. In scheme 1, he can sell the grain that he does not consume and lend the money at 10%. In scheme 2, he can invest the grain that he does not consume (e.g. planting as seed) for a return of 50%. Which of the following statements is correct? Consumption later, $ 150 110 60 39 FF(lend at 10%) FF (invest at 50%) 60 68 Consumption now, $ 100 O Going from scheme 1 to scheme 2, the substitution and income effects have opposite effects on period 2 consumption. O Marco can do better than consumption choice B by investing all of his grain and borrowing against his period 2 output. O Marco is less impatient at B than at A. O Marco can do better than consumption choice B by investing all of his grain and consuming the output in period 2.

diagram depicts Marco ice of consumptions in periods 2. He has $100 worth of grain in period 1 and no income in period 2. Marco has two choices. In scheme 1, he can sell the grain that he does not consume and lend the money at 10%. In scheme 2, he can invest the grain that he does not consume (e.g. planting as seed) for a return of 50%. Which of the following statements is correct? Consumption later, $ 150 110 60 39 FF(lend at 10%) FF (invest at 50%) 60 68 Consumption now, $ 100 O Going from scheme 1 to scheme 2, the substitution and income effects have opposite effects on period 2 consumption. O Marco can do better than consumption choice B by investing all of his grain and borrowing against his period 2 output. O Marco is less impatient at B than at A. O Marco can do better than consumption choice B by investing all of his grain and consuming the output in period 2.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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