Suppose Matt and Gabe Must Both Choose Between Two Jobs

question 33

Multiple Choice

Suppose Matt and Gabe must both choose between two jobs, a safe job that pays $250 per week and a risky job that pays $300 per week. The value of safety to each is $75 per week. Having more income than the other is worth $75 per week to each, and having less income than the other means a $75-per-week reduction in satisfaction. Having the same income as the other means no change in satisfaction. The payoff matrix below summarizes this situation. In this game, we can predict that choosing the risky job will:

• A)give Matt more satisfaction only if Gabe chooses the risky job.
• B)give Matt more satisfaction only if Gabe chooses the safe job.
• C)give Matt more satisfaction no matter which job Gabe chooses.
• D)never give Matt more satisfaction.

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Definitions:

Variable Costs

Expenses that fluctuate in unison with the amount of production or the quantity of goods produced.

Sales Volume Variance

A measure used in variance analysis to assess the difference between the actual units sold and the budgeted sales volume, impacting revenue.

Actual Sales Volume

The real number of units sold or services provided by a business during a specific period, as opposed to forecasted or planned sales volumes.

Budgeted Contribution Margin

The anticipated difference between sales revenue and variable costs in a budget period.