Consider an entrepreneur living in a two-period, one-good, riskless economy with prefer- ences represented by a...

Transcribed Image Text:

Consider an entrepreneur living in a two-period, one-good, riskless economy with prefer- ences represented by a concave utility function over consumption in the first and second period (e.g., ln xo + log x₁). The entreprener owns a firm with production represented by a function denoted by f(z) where z is the input and f'() > 0. The entrepreneur can borrow and lend in the financial market by trading contracts that have a return r and a price q. Assume that f'(0) > and let eo and e₁ be the endowment in the first and second period, respectively. 0 In a graph (e.g., you don't need any computation) identify the entrepreneur's consumption choice (x0, x1), input decision z, how much she receives from the production process, how much she borrows (or lends) and how much she has to payback to the market (or receive from the market) in the following cases: (a) eo = 0 and e₁ > 0. (b) eo=e₁ = 0. Consider an entrepreneur living in a two-period, one-good, riskless economy with prefer- ences represented by a concave utility function over consumption in the first and second period (e.g., ln xo + log x₁). The entreprener owns a firm with production represented by a function denoted by f(z) where z is the input and f'() > 0. The entrepreneur can borrow and lend in the financial market by trading contracts that have a return r and a price q. Assume that f'(0) > and let eo and e₁ be the endowment in the first and second period, respectively. 0 In a graph (e.g., you don't need any computation) identify the entrepreneur's consumption choice (x0, x1), input decision z, how much she receives from the production process, how much she borrows (or lends) and how much she has to payback to the market (or receive from the market) in the following cases: (a) eo = 0 and e₁ > 0. (b) eo=e₁ = 0.

Answer rating: 100% (QA)

dim M2 as it ex spanned by two vectorz dim 121 4 dim M 122 So Explanations ... View the full answer