2. (24\%) Farmer Boris lives for two periods. In the first period, he has 120...
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2. (24\%) Farmer Boris lives for two periods. In the first period, he has 120 bushels of wheat. If Boris consumes only a portion of the wheat in period 1 , he can use the rest as seeds so he can harvest and consume in period 2. Each bushel of seeds yield 2 bushels of wheat in period 2. Boris' utility function is u(c1,c2)=c1+0.5c2, where c1 and c2 are the amount of wheat (in bushels) he consumes in periods 1 and 2 respectively. (1) How much wheat will Boris consume in the first period and in the second period? Suppose that a new irrigation system can double the yields (i.e., each bushel of seeds planted in period 1 yield 4 bushels of wheat in period 2). (2) What is the maximum amount of wheat Boris is willing to give up in period 1 in exchange for the new irrigation system
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