If the Both Peter and John Could Negotiate a Settlement

question 35

Multiple Choice

If the both Peter and John could negotiate a settlement, but the cost of making a transaction for Peter were $5 (he is very shy and does not like to talk to strangers) , how many phone calls would John end up making if he (John) had the rights to make any cell phones he liked at the coffee shop?

• A)2
• B)0
• C)1
• D)3

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Definitions:

Monotonic Preferences

A preference pattern where more of a good is always preferred to less, maintaining a consistent order.

Utility Function

A mathematical representation of how different combinations of goods or services lead to different levels of happiness or satisfaction for an individual.

Income

Earnings from work or investments, often measured in terms of money received over a period of time.

Utility Function

A mathematical representation of how different quantities of goods or services generate levels of happiness or satisfaction to the consumer.