6. Joe and Sam wish to complete the Auckland marathon. They each have the following twooptions: (a) training for the marathon at time 1 (utility=0) and completing the marathon attime 2 (utility=16); and (b) going to the beach at time 1 (utility=8} and not completing themarathon at time 2 (utility=0).a. Joe discounts the future exponentially. His & =3/4.1. From the point of view of time 0: What is his utility of a? What is his utility ofb?it. From the point of view of time 1: What is his utility of a? What is his utility ofb?b. Sam discounts the future hyperbolically. His B=1/4 and his 6 = 1.i. From the point of view of time 0: What is his utility of a? What is his utility ofb?ii. From the point of view of time 1: What is his utility of a? What is his utility ofb?C.Who will not complete the marathon? Why?d. Who will complete the marathon? Why?

In decision theory and economics, utility refers back to the measure of satisfaction or happiness…

Answered: utility

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Economics

utility

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

6. Joe and Sam wish to complete the Auckland marathon. They each have the following two
options: (a) training for the marathon at time 1 (utility=0) and completing the marathon at
time 2 (utility=16); and (b) going to the beach at time 1 (utility=8} and not completing the
marathon at time 2 (utility=0).
a. Joe discounts the future exponentially. His & =3/4.
1. From the point of view of time 0: What is his utility of a? What is his utility of
b?
it. From the point of view of time 1: What is his utility of a? What is his utility of
b?
b. Sam discounts the future hyperbolically. His B=1/4 and his 6 = 1.
i. From the point of view of time 0: What is his utility of a? What is his utility of
b?
ii. From the point of view of time 1: What is his utility of a? What is his utility of
b?
C.
Who will not complete the marathon? Why?
d. Who will complete the marathon? Why?

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Step 2: Explain the utility of a and b from the view point of 0 and 1.

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Step 3: Explain the utility of a and b from the view point of 0 and 1.

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Step 4: Explain who will not complete the marathon

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Step 5: Explain who will complete the marathon

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