The Table Below Reflects the Levels of Total Utility Received

question 78

Essay

The table below reflects the levels of total utility received from income for each of four members of a society.

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:

ATC

Average Total Cost is the sum of all production costs divided by the quantity of output produced.

Perfectly Competitive Firm

A theoretical business entity in a market where no single company can influence the price of goods or services, and where all products are identical.

Market Demand

The total quantity of a good or service that all consumers in a market are willing and able to purchase at various prices.

Market Supply

Market Supply refers to the total amount of a specific good or service available to consumers in a market at a given price over a certain period.