They Are Thinking of Buying a Sofa

question 10

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) = (3 + 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 $2,000 to spend on the sofa and other stuff.Ray has a total of $1,600 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)$2,100.
• B)$533.33.
• C)$750.
• D)$1,400.
• E)$2,800.

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Definitions:

Value

The degree of importance, worth, or usefulness of something.

Strength

In the context of data, it often refers to the magnitude or intensity of a relationship or effect among variables.

Curvilinear

A relationship between two variables that is represented by a curve, indicating that the relationship is not linear.

Age

A measure of time, typically used to indicate how long an individual or entity has existed, often expressed in years.