Recall Bob and Ray in Problem 4

question 12

Multiple Choice

Recall Bob and Ray in Problem 4. They 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) = (2 + 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 $3,000 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) $3,000.
• B) $1,500.
• C) $2,000.
• D) $1,050.
• E) $4,000.

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Definitions:

Operant Conditioning

Is a learning process through which the strength of a behavior is modified by reinforcement or punishment.

Unconscious Process

Mental activities of which individuals are not aware, influencing behaviors and perceptions without conscious realization.

Particular Consequence

Particular consequence refers to a specific result or outcome that follows an action, decision, or behavior, highlighting the direct impact of certain activities.

Classically Conditioned

Refers to a learning process in which a neutral stimulus becomes associated with a meaningful stimulus and acquires the capacity to elicit similar responses.