10.14 In an isolated mountain village, the only crop is corn. Villagers plan for two time periods.

In the rst time period each villager will harvest 100 bushels. In the second time period, no corn

will be harvested. There is no trade with the rest of the world and no stocks of corn remain from

before the rst period. Corn can be stored from one time period to the next, but rats eat 25%

of what is stored. The villagers all have Cobb-Douglas utility functions U(C1; C2) = C1C2 and can

allocate their own corn between consumption and storage as they wish. If the introduction of cats

to the village reduces the rats' predations to 10% of what is stored:

In the rst time period each villager will harvest 100 bushels. In the second time period, no corn

will be harvested. There is no trade with the rest of the world and no stocks of corn remain from

before the rst period. Corn can be stored from one time period to the next, but rats eat 25%

of what is stored. The villagers all have Cobb-Douglas utility functions U(C1; C2) = C1C2 and can

allocate their own corn between consumption and storage as they wish. If the introduction of cats

to the village reduces the rats' predations to 10% of what is stored:

allocate their own corn between consumption and storage as they wish. If the introduction of cats

to the village reduces the rats' predations to 10% of what is stored:

(a) consumption in the rst time period will not change.

(b) villagers will consume 5% more corn in each time period.

(c) consumption in the rst time period will increase, but by less than 5%.

(d) consumption in the second time period would not change.

(e) consumption in the rst time period will decrease.