Question: Canonical utility function. Consider the utility function c - o uc ) 1 - 0 ( a ) where c denotes consumption of some arbitrary

Canonical utility function. Consider the utility function c-o uc)1-0(a) where c denotes consumption of some arbitrary good and o (Greek lowercase letter "sigma") is known as the "curvature parameter" because its value governs how curved the utility function is. In the following, restrict your attention to the region e >0(because "negative consumption" is an ill-defined concept). The parameter o is treated as a constant. i. Plot (preferably with MATLAB) the utility function for o =0. Does this utility function display diminishing marginal utility? Is marginal utility ever negative for this utility function? ii. Plot (preferably with MATLAB) the utility function for o =1/2. Does this utility function display diminishing marginal utility? i. Consider instead the natural-log utility function u(c)= In(c). Does this utility function display diminishing marginal utility? Is marginal utility ever negative for this utility function? iv. Determine the value of o (if any value exists at all) that makes the general utility function presented above collapse to the natural-log utility function in part (c)(Hint: Examine the derivaives of the two functions.)

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