Bob and Ray Are Thinking of Buying a Sofa

question 8

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 $800 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) $533.33.
• B) $800.
• C) $1,200.
• D) $450.
• E) $1,600.

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Definitions:

Mutually Beneficial Agreements

Contracts or arrangements that provide favorable outcomes for all parties involved.

Prospecting

The process of identifying potential customers or clients for a business's products or services, often involving research and communication efforts.

Preapproach

A stage in the sales process that involves gathering information and planning before actually contacting a potential customer.

Collaborative Relationships

A partnership or working relationship where two or more parties work together towards a common goal, often seen in business contexts for mutual benefit.