Recall Bob and Ray in Problem 4

question 5

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 $1,200 to spend on the sofa and other stuff. Ray has a total of $4,000 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) $1,333.33.
• B) $1,600.
• C) $850.
• D) $2,400.
• E) $3,200.

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Definitions:

Arthropods

A diverse phylum of invertebrate animals that have an exoskeleton, a segmented body, and paired jointed appendages, including insects, arachnids, and crustaceans.

Two-cycle Breathing

A breathing technique that involves inhaling and exhaling in two distinct phases or cycles, often used in swimming or respiratory exercises.

Birds

Warm-blooded vertebrates characterized by feathers, beaked jaws, and typically the ability to fly.

Presentation Style

The way in which information is shown or explained to an audience, including the use of visuals, speech, and other media.