What is the maximum amount jones is willing to pay

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Reference no: EM13220742

Smith and Jones are trying to decide whether to share a two bedroom apartment or to live separately in one bedroom apartments. The rental fees are $300 per month for single bedrooms, and $420 per month for doubles. Smith is a smoker and would be willing to give up $250 per month rather than give up being able to smoke at home. Jones, however, is a nonsmoker and would sacrifice $150 per month rather than live with a smoker. Apart from the issues of smoking and rent, the two find joint living neither more nor less attractive than living alone. Neither has an alternative roommate available. Will they live together or separately? If together, what is the social surplus? If they live together, what is the maximum amount Jones is willing to pay in monthly rent? If they agree to split any economic surplus equally, what will each pay in rent?

Reference no: EM13220742

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