A Cake Is to Be Shared by Two People

question 69

Multiple Choice

A cake is to be shared by two people.Both desire the largest piece possible.One of the two will cut the cake.Under which of the following situations will the cutter adopt a Rawlsian social welfare function?

• A) The person cutting the cake chooses the first piece.
• B) The person not cutting the cake chooses the first piece.
• C) The two individuals will bid for the right to cut the cake and choose first.
• D) The two individuals will toss a coin for the right to cut the cake and choose first.

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Definitions:

Stockholders' Equity

The value remaining in a company after liabilities are deducted from total assets; also known as shareholder's equity.

Paid-in Capital

Refers to the funds raised by a company through the issuance of shares. This capital is provided by shareholders in exchange for equity in the company.

Preferred Stock

Preferred stock is a type of stock that grants holders certain priorities over common stock, including dividends and asset liquidation, often without voting rights.

Common Stock

A type of equity security that represents ownership in a corporation, giving shareholders voting rights and a share in the company's profits through dividends.