An economy consists of two individuals, Lynne and Jonathan, whose utility levels are given by (U_{L}) and

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An economy consists of two individuals, Lynne and Jonathan, whose utility levels are given by \(U_{L}\) and \(U_{J}\), respectively.

a. Suppose that the social welfare function is

\[ W=U_{L}+U_{J} \]

True or false: Society is indifferent between giving a dollar to Lynne and a dollar to Jonathan.

b. Now suppose that, instead, the social welfare function is

\[ W=U_{L}+8 U_{J} \]

True or false: Society values Jonathan's happiness more than Lynne's.

c. Now suppose that, instead, the social welfare function is

\[ W=\min \left[U_{L}, U_{\lambda}\right] \]

True or false: In this society, the optimal distribution of income is complete equality.

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Public Finance

ISBN: 9780073511283

8th Edition

Authors: Harvey Rosen, Ted Gayer

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