Reconsider the problem of the Video Acquisitions Officer in Problem 1.14. Suppose the officers of your residence hall give you a specified amount of money to spend, and want you to maximize the number of videos you can rent with that budget. You can choose from the same three plans (A, B, and C) available in Problem 1.14.
In problem 1.14
Plan A: Pay $3 per video, with no additional fees.
Plan B: Join the Frequent Viewer Club. Here you pay a yearly membership fee of $50, with an additional charge of $2 for each video rented.
Plan C: Join the Very Frequent Viewer Club. In this club you pay a yearly membership fee of $150, with an additional charge of $1 for each video rented.
a) Which plan would you select if your instructions are to rent the most movies possible while spending $125 per year?
b) Which plan would you select if your instructions are to rent the most movies possible while spending $300 per year?
c) In this exercise, is the number of videos rented endogenous or exogenous? Explain.
d) Is the choice of plan (A, B, or C) endogenous or exogenous? Explain.
e) Are total expenditures on videos endogenous or exogenous? Explain.