Assume that there are eight oranges to be divided between Friday and Crusoe. Take a utilitarian view-assume

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Assume that there are eight oranges to be divided between Friday and Crusoe. Take a utilitarian view-assume that social welfare is the sum of the utilities of the two individuals. Using the data from Problem 1, what is the social welfare corresponding to each possible allocation of oranges? What allocation maximizes social welfare? Show that it has the property that the marginal utility of an extra orange given to each individual is the same.

Data From problem 1

Assume that Crusoe and Friday have identical utility functions described by the following table.

Utility Functions for Friday and Crusoe NUMBER OF ORANGES UTILITY 1 11 2 21 3 30 4 38 5 45 6 48 7 8 50 51

Draw the utility function. Fill in the marginal utility data in the table above, and draw the marginal utility function.

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Related Book For  answer-question

Economics Of The Public Sector

ISBN: 9780393925227

4th Edition

Authors: Joseph E. Stiglitz, Jay K. Rosengard

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