Owen and Simon both like playing with balls and cars. Suppose B represents the n

Question

Owen and Simon both like playing with balls and cars. Suppose B represents the number of balls, and C represents the number of cars. If Owen's utility function can be given by UB, c) = 10B + 5C, and Simon's utility function can be given by U(B, C) = 6B + 6C, which of the following trades would be mutually beneficial? a.Owen gives Simon 2 balls in exchange for 3 cars b.Owen gives Simon 2 cars in exchange for 3 balls C. Owen gives Simon 3 cars in exchange for 2 balls d.Owen gives Simon 3 balls in exchange for 2 cars

Explanation / Answer

Mutually beneficial trade:

Option c is correct

Owen gives Simon 3 cars in exchange for 2 balls.

Change in Owen's utility = 2 x 10 - 5 x 3 = 5 utils (increase)

Change in Simon's utility = 3 x 6 - 2 x 6 = 6 utils (increase)

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