Question 4 (10 points) Suppose that you discount the future hyperbolically. Assume that both and 8...

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Question 4 (10 points) Suppose that you discount the future hyperbolically. Assume that both and 8 are strictly greater than zero but strictly smaller than one. At t = 0, you are given the choice between the following three options: a (1 utile at t = 0), b (2 utiles at t = 1), and c (3 utiles at t = 2). As a matter of fact, at t = 0 you are indifferent between a and b and between b and c. (a) Compute and 8. (b) Suppose, in addition, that at t = 0 you are indifferent between c and d (x utiles at t=3). What is x? Question 4 (10 points) Suppose that you discount the future hyperbolically. Assume that both and 8 are strictly greater than zero but strictly smaller than one. At t = 0, you are given the choice between the following three options: a (1 utile at t = 0), b (2 utiles at t = 1), and c (3 utiles at t = 2). As a matter of fact, at t = 0 you are indifferent between a and b and between b and c. (a) Compute and 8. (b) Suppose, in addition, that at t = 0 you are indifferent between c and d (x utiles at t=3). What is x?

Answer rating: 100% (QA)

a To compute the discount factors and we use the information provided in the problem We ... View the full answer