Question
A two-person society has a utilitarian social welfare function U = u 1 ( c 1 ) + u 2 ( c 2 ) defined
A two-person society has a utilitarian social welfare functionU=u1(c1) +u2(c2) defined over the utilities of the two citizens.ciis the consump tion of citizeni. Supposeu1(c1) =c1,u2(c2) = 2c0.5
2. The society has 200
units of consumption and initially all of them belong to citizen 1. Each unit the government takes away from citizen 1 to give to citizen 2 results in a dead weight loss of 0.25 units. How much should the government take from citizen 1 to give to citizen 2? (An approximate solution rounded to the nearest integer is fine.) Explain why this is the government's optimum given its social welfare function
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