Herbie's utility function is , where x is the number of x's he consumes per week and y is the number of y's he consumes per week. Herbie has $200 a week to spend. The price of x is $1. The price of y is currently $4 per unit. Herbie has received an invitation to join a club devoted to the consumption of y. If he joins the club, Herbie 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 Herbie would be willing to pay to join this club?
A) $33
B) $21
C) $4.50
D) $16.50
E) None of the above.

Question

Herbie's utility function is  , where x is the number of x's he consumes per week and y is the number of y's he consumes per week. Herbie has $200 a week to spend. The price of x is $1. The price of y is currently $4 per unit. Herbie has received an invitation to join a club devoted to the consumption of y. If he joins the club, Herbie 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 Herbie would be willing to pay to join this club?
A) $33 
B) $21 
C) $4.50 
D) $16.50 
E) None of the above.

Quizplus · Accepted Answer

The Answer of Herbie's utility function is  , where x is the number of x's he consumes per week and y is the number of y's he consumes per week. Herbie has $200 a week to spend. The price of x is $1. The price of y is currently $4 per unit. Herbie has received an invitation to join a club devoted to the consumption of y. If he joins the club, Herbie 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 Herbie would be willing to pay to join this club?
A) $33 
B) $21 
C) $4.50 
D) $16.50 
E) None of the above.

Herbie's Utility Function Is , Where X Is the Number