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.

---

Definitions:

Limited Liability

A corporate structure where an individual's financial risk in the business is restricted to their investment in the company.

Corporation

A legal entity, created by the state, whose assets and liabilities are separate from its owners.