The Only Quantities of Good 1 That Irene Can Buy

question 13

Multiple Choice

The only quantities of good 1 that Irene can buy are 1 unit or 0 units. For all positive values of x₂, Irene's preferences are represented by the utility function (x₁ + 10) (x₂ + 2) . If her income is $8 and the price of good 2 is $1, then Irene's reservation price for good 1 is

• A) $1.82.
• B) $1.50.
• C) $.91.
• D) $5.
• E) $.10.

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Definitions:

Nonnegotiable

Unable to be bought, sold, exchanged, or transferred to another party.

Express Contract

A clearly stated agreement between parties, with terms explicitly mentioned either orally or in writing.

Commodities

Commodities are raw materials or agricultural products that can be bought and sold, such as gold, oil, or grains.

Nonnegotiable

Something that cannot be bargained or altered; absolute or not subject to change.