Lena, a student, receives a monthly allowance of $100, which she spends solely on books and bottles of fruit juice. Her preferences for these two goods are very nicely behaved. Originally, books cost $10 each and fruit juice costs $5 per bottle. Assume Lena optimally consumed 3 books under these original conditions. The local bookstores would like to encourage students to buy more books. They jointly implement the following policy for the next month. To purchase any book, students must first pay a $10 membership fee. After paying the membership fee, the student will be able to purchase books for $6 a book. Given that Lena only purchases her books from the local bookstores, is Lena better off, worse off, or equally happy after the bookstores implement this policy? a) Lena is equally happy. b) Lena is worse off. c) Lena is better off.
Lena, a student, receives a monthly allowance of $100, which she spends solely on books and bottles of fruit juice. Her preferences for these two goods are very nicely behaved. Originally, books cost $10 each and fruit juice costs $5 per bottle. Assume Lena optimally consumed 3 books under these original conditions. The local bookstores would like to encourage students to buy more books. They jointly implement the following policy for the next month. To purchase any book, students must first pay a $10 membership fee. After paying the membership fee, the student will be able to purchase books for $6 a book. Given that Lena only purchases her books from the local bookstores, is Lena better off, worse off, or equally happy after the bookstores implement this policy? a) Lena is equally happy. b) Lena is worse off. c) Lena is better off.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Lena, a student, receives a monthly allowance of
$100, which she spends solely on books and
bottles of fruit juice. Her preferences for these
two goods are very nicely behaved.
Originally, books cost $10 each and fruit juice
costs $5 per bottle.
Assume Lena optimally consumed 3 books
under these original conditions.
The local bookstores would like to encourage
students to buy more books. They jointly
implement the following policy for the next
month. To purchase any book, students must
first pay a $10 membership fee. After paying the
membership fee, the student will be able to
purchase books for $6 a book.
Given that Lena only purchases her books from
the local bookstores, is Lena better off, worse
off, or equally happy after the bookstores
implement this policy?
a) Lena is equally happy.
b) Lena is worse off.
c) Lena is better off.
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