Question: Richard's preferences over chocolate, c, and money, m, can be represented by the utility function u (c, m) : 6c+m+6 (c-rc) + (m_rm) where

Richard's preferences over chocolate, c, and money, m, can be represented by

Richard's preferences over chocolate, c, and money, m, can be represented by the utility function u (c, m) : 6c+m+6 (c-rc) + (m_rm) where re is his chocolate reference point, rm is his money reference point, and the function is defined as X X 0 x x < 0 1. If his reference point is the status quo (that is, his initial endowment), what is the maximum price Richard would be willing to pay to buy a chocolate? 2. If his reference point is the status quo, what is the minimum price Richard would be willing to accept to sell a chocolate he already owned?

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