Multiple Choice
Sam's utility function is U(x, y) = 2x + y, where x is the number of x's he consumes per week and y is the number of y's he consumes per week. Sam has $200 a week to spend. The price of x is $4. Sam currently doesn't consume any y. Sam has received an invitation to join a club devoted to the consumption of y. If he joins the club, Sam can get a discount on the purchase of y. If he belonged to the club, he could buy y for $1 a unit. How much is the most Sam would be willing to pay to join this club?
A) Nothing
B) $100 a week
C) $50 a week
D) $40 a week
E) None of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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