John Parker Nosey works for the Internal Revenue Service. He is in charge of auditing income of self-employed people. In any year, people divide their total income between consumption and saving. John cannot determine people's consumptions, but he is able to determine how much people have saved over the course of a year. From years of experience, he has learned that people act as if they are maximizing a utility function of the form U(c, s) = 10,000ln(c) + s, where c is the number of dollars worth of consumption in a year and s is the number of dollars saved.
A) If someone saves at least $1,000, then that person's income is at least $11,000.
B) If someone saves nothing, then that person must earn less than $1,000.
C) If someone saves exactly $1,000, then that person's income must be greater than $1,000 and less than $10,000.
D) If someone saves exactly $10,000, then that person must earn exactly $21,000.
E) If someone saves more than $1,000, then that person's income must be more than $20,000.
Correct Answer:
Verified
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