9. Al has found $1,000 and has decided to divide it between his children, Bud and Kelly.
Question:
9. Al has found $1,000 and has decided to divide it between his children, Bud and Kelly.
a. If Al believes that a fair division means giving equal amounts of cash to everyone, how much should he give to Bud and Kelly?
b. Suppose that Bud is rich and Kelly is poor.
Assume that the marginal utility provided by a dollar declines the richer you are. If Al wishes to ensure that his gift provides the greatest possible collective happiness to his children, how should he divide the cash?
c. Suppose that Bud is rich and Kelly is poor. Assume that the marginal utility provided by a dollar declines the richer you are. If Al is concerned with distributing equal happiness to Bud and Kelly, how should he divide the cash?
d. How do each of your answers to (a), (b), and
(c) align with some notion of fairness?
Step by Step Answer:
Microeconomics
ISBN: 9780716759751
1st Edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson