They Are Thinking of Buying a Sofa

question 12

Multiple Choice

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) = (4 + 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 $800 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)$1,000.
• B)$1,200.
• C)$1,800.
• D)$650.
• E)$2,400.

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Definitions:

ERG Theory

A motivation theory developed by Clayton Alderfer that categorizes human needs into three groups: Existence, Relatedness, and Growth.

Social Support

The perception and actuality of assistance and emotional encouragement received from others, which can significantly impact mental health and resilience.

Self-Determination Theory

A psychological framework positing that individuals are motivated to grow and change through three innate psychological needs: competence, relatedness, and autonomy.

Particular Needs

Specific requirements or desires of an individual that vary depending on personal circumstances or contexts.