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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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