In Problem 6, the Only Quantities of Good 1 That

In Problem 6, the only quantities of good 1 that Barbie can buy are 1 unit or zero units. For x₁ equal to zero or 1 and for all positive values of x₂, suppose that Barbie's preferences were represented by the utility function (x₁ + 10) (x₂ + 12) . Then if her income were $4, her reservation price for good 1 would be

A) $2.91.
B) $6.50.
C) $1.45.
D) $.83.
E) $1.10.

Correct Answer:

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