Owen and Simon Both Like Playing with Balls and Cars

question 13

Multiple Choice

Owen and Simon both like playing with balls and cars.Suppose B represents the number of balls,and C represents the number of cars.If Owen's utility function can be given by U(B,C) = 10B + 5C,and Simon's utility function can be given by U(B,C) = 6B + 6C,which of the following trades would be mutually beneficial?

• A) Owen gives Simon 3 cars in exchange for 2 balls
• B) Owen gives Simon 2 cars in exchange for 3 balls
• C) Owen gives Simon 3 balls in exchange for 2 cars
• D) Owen gives Simon 2 balls in exchange for 3 cars

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Definitions:

Journal Entry

A record in accounting that reflects a business transaction, listing the accounts and amounts to be debited and credited.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Title Conveyance

The legal process of transferring ownership of property from one party to another.

Journal Entry

A record in accounting that logs a transaction and its impact on financial statements, consisting of a debit and a credit.