The Only Quantities of Good 1 That Tomoko Can Buy

question 75

Multiple Choice

The only quantities of good 1 that Tomoko can buy are 1 unit or 0 units. For all positive values of x₂, Tomoko's preferences are represented by the utility function (x₁ + 14) (x₂ + 16) . If her income is $20 and the price of good 2 is $1, then Tomoko's reservation price for good 1 is

• A) $.88.
• B) $8.50.
• C) $2.40.
• D) $4.80.
• E) $1.04.

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