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.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 17E
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