Sherry’s utility is US and her income is YS. Marsha’s utility is UM and her income is YM. Suppose it is the case that:
Define the Pareto efficient redistribution, and explain why the concept is relevant in this situation. Suppose that initially Sherry and Marsha both have incomes of $ 100. Assuming that the social welfare function is additive, what happens to social welfare if $ 36 is taken away from Marsha and given to Sherry?
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