The Table Below Reflects the Levels of Total Utility Received

question 136

Essay

The table below reflects the levels of total utility received from income for each of four members of a society.
$$\begin{array} { l l l l l } \text { Income } & \text { Peter } & \text { Paul } & \text { Mary } & \text { Jane } \\\hline \$ 1 & 15 & 32 & 20 & 16 \\\$ 2 & 29 & 61 & 38 & 30 \\\$ 3 & 42 & 87 &54& 42 \\\$ 4 & 54 & 110 & 54 & 52 \\\$ 5 & 65 & 130 & 68 & 60 \\\$ 7 & 75 & 147 & 80 & 66 \\\$ 8 & 84 & 161 & 90 & 70 \\\$ 2 & 92 & 172 & 98 & 72\end{array}$$
a.Assume that the society has the following income distribution:
Peter $3
Paul $7
Mary $5
Jane $3
Is it possible for the government to increase total aggregate utility by redistributing income among members of society? Explain your answer.
b.Assume that the government has $19 to allocate among the four members of society.(Assume that no one has any income to start with.) If the government is interested in distributing income in a way that maximizes aggregate total utility, how should it distribute the $19 of income?
c.Does the table above describe a situation characterized by diminishing marginal utility? Explain your answer.

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Definitions:

Minimum ATC

The lowest point on the average total cost curve, representing the most efficient scale of production for a firm.

Creative Destruction

A term coined by Joseph Schumpeter to describe the process by which old industries are destroyed and new ones are created as part of the evolution of capitalism.

New Firms

Entrepreneurial ventures that have recently been established in the market.

Dominant Firms

Companies that hold a significant portion of market share within their industry, influencing market prices and competition.