Suppose That Romeo in Problem 8 Has the Utility Function

question 3

Multiple Choice

Suppose that Romeo in Problem 8 has the utility function U = S⁸_RS⁴_J and Juliet has the utility function U = S⁴_RS⁸_J, where S_R is Romeo's spaghetti consumption and S_J is Juliet's. They have 120 units of spaghetti to divide between them.

• A) Romeo would want to give Juliet some spaghetti if he had more than 60 units of spaghetti.
• B) Juliet would want to give Romeo some spaghetti if she has more than 78 units.
• C) Romeo and Juliet would never disagree about how to divide the spaghetti.
• D) Romeo would want to give Juliet some spaghetti if he has more than 76 units of spaghetti.
• E) Juliet would want to give Romeo some spaghetti if she has more than 80 units of spaghetti.

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Definitions:

Impairment Loss

A charge to the income statement that occurs when the carrying amount of an asset exceeds its recoverable amount, indicating the asset is not expected to generate future economic benefits.

Recoverable Amount

The higher value between an asset's fair value less costs to sell and its value in use.

Carrying Amount

Carrying amount is the value at which an asset is recognized in the balance sheet after deducting accumulated depreciation and impairment losses.

Revaluation Model

An accounting method that allows assets to be carried at a revalued amount, reflecting their fair value at the date of revaluation.