Bob and Ray Are Thinking of Buying a Sofa

question 21

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 $2,000 to spend on the sofa and other stuff. Ray has a total of $2,400 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) $2,400.
• B) $800.
• C) $1,600.
• D) $850.
• E) $3,200.

---

Definitions:

Acceptance and Commitment Therapy

A form of psychotherapy that encourages individuals to accept their thoughts and feelings rather than fighting or feeling guilty for them.

Pain Management

The medical discipline focused on reducing or managing pain in patients through various approaches, including medication, physical therapy, and psychological methods.

Opiate Drugs

A class of drugs derived from opium that are typically used for their analgesic properties, but can also lead to dependence and addiction.

Analgesics

Medications designed specifically to relieve pain.