Bob and Ray Are Thinking of Buying a Sofa

question 9

Multiple Choice

Bob and Ray are thinking of buying a sofa. Bob's utility function is U_B(S, M_B) = (1 + S) M_B and Ray's utility function is U_R(S, M_R) = (3 + S) M_R, where S = 0 if they don't get the sofa and S = 1 if they do and where M_B and M_R are the amounts of money they have respectively to spend on their private consumptions. Bob has a total of $1,200 to spend on the sofa and other stuff. Ray has a total of $1,600 to spend on the sofa and other stuff. The maximum amount that they could pay for the sofa and still arrange to both be better off than without it is

• A) $1,500.
• B) $533.33.
• C) $550.
• D) $1,000.
• E) $2,000.

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Definitions:

Individuation

A condition of psychological health resulting from the integration of all conscious and unconscious facets of the personality.

Psychic Energy

A concept in psychology referring to the energy within the psyche, responsible for thought, feeling, and behavior.

Balance

A state of equilibrium where different elements are in equal or correct proportions to maintain stability.

Collective Conscious

A set of shared beliefs, ideas, attitudes, and knowledge that is common to a social group or society.