Question
Suppose that Tang and Wilson must split a fixed 400 pounds of food between them. Tang's utility function is Ur=sqrt (F1) and Wilson's utility function
Suppose that Tang and Wilson must split a fixed 400 pounds of food between them. Tang's utility function is Ur=sqrt (F1) and Wilson's utility function is Ur=sqrt (F2), where F1 and F2 are pounds of food to Tang and Wilson respectively.
A. How much utility will Tang and Wilson receive if the food is distributed evenly between them?
B. If the social welfare function is Ur+Uw then what distribution of food between Tang and Wilson maximizes social welfare?
C. If social welfare is maximized when they each obtain the same level of utility, then what distribution of food between Tang and Wilson maximizes social welfare?
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Solution Given that F and E are bounds of food to Tang and ...
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Public Finance
Authors: Harvey Rosen, Ted Gayer
10th edition
9781259716874, 78021685, 1259716872, 978-0078021688
