# 18. Chris maximizes discounted utility U(co, c1, c2)co + ốc1 + 8?c2 for 80.8.%3DWhich of the following consumption streams will he choose? (Hint: there is noneed to compute the utility function for each option. Just look at the tradeoffsbetween the immediate consumption and the future consumption.)(A) co = c1 = c2 = 10;5, c1 = 15, c25, c1 = 10, c2 = 15;(D) co = 9, c1 = 10, c2 = 12.(B) co10;(C) co%3D19. Emma maximizes quasi-hyperbolic discounted utility U(co, C1, c2) = co+Bốc1 +B8?c2 for B = 0.5 and d = 0.8. Which of the following consumption streamswill she choose?(A) co = C1 = c2 = 10;(B) co5, c1 = 15, c210;(C) co = 5, c1 = 10, c2 = 15;(D) co = 9, c1 = 10, c2 = 12.

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Asked Dec 10, 2019
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18) The correct answer is option C.

Since, Chris maximizes discounted utility U(C0, C1, C2) = C0 + δC1 + δ2 C2, his value of future consumption will be less in present terms. The discounted utility describes the utility of future consumption. Since he would w...

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