Bob and Ray are thinking of buying a sofa. Bob's utility function is Ug(S, MB) (1 + S) Mg and Ray's utility function is UR(S, MR) = (4 + S)MR, where S= 0 if they don't get the sofa and S = 1 if they do and where MB and MR 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 $1,200. $2,200. $650. $1,800. $1,000.

Bob and Ray are thinking of buying a sofa. Bob's utility function is Ug(S, MB) (1 + S) Mg and Ray's utility function is UR(S, MR) = (4 + S)MR, where S= 0 if they don't get the sofa and S = 1 if they do and where MB and MR 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 $1,200. $2,200. $650. $1,800. $1,000.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 1SCQ: Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can...

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