Suppose Matt and Gabe Must Both Choose Between Two Jobs

question 36

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. If we compare the payoffs when both choose the risky job to the payoffs when both choose the safe job, then we can see that:

• A)each would be better off if they both picked the risky job.
• B)each would be better off if they both picked the safe job.
• C)it is socially optimal for both to pick the risky job.
• D)both are equally off with either outcome.

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