Recall Bob and Ray in Problem 4

question 15

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) = (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 $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) $2,100.
• B) $533.33.
• C) $750.
• D) $1,400.
• E) $2,800.

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Definitions:

Posttraumatic Stress Disorder

A mental health condition triggered by experiencing or witnessing a terrifying event, characterized by flashbacks, nightmares, and severe anxiety.

Psychosis

A mental health condition characterized by a loss of connection with reality, manifesting through delusions, hallucinations, and disordered thinking.

Somatization Disorder

A psychological disorder characterized by the presence of physical symptoms that have no identifiable physical cause, often linked to emotional distress.

Hypokinesia

A condition characterized by reduced movement or slowness of movement, often associated with Parkinson's disease.