Sam’s utility function is U (x, y) = 2x + y. Sam has $200 to spend. The price of x is $4. Sam currently doesn’t consume any y. Sam has received an invitation to join a club devoted to the consumption of y. If he joins the club, Sam 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 Sam would be willing to pay to join this club?

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2 Jun 2021

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