Beruflich Dokumente
Kultur Dokumente
below.
Other Goods
$50,000
$50,000
Education
b.
With $8,000 worth of free public education, the family can consumer up to $8,000
of education without reducing the consumption of other goods.
Other Goods
$50,000
$8,000
$50,000
Education
worth
c.
The family maximized utility at point A before the introduction of free public
education, and
maximizes utility at point B after free public education is introduced, so the optimal consumption of
education fell.
$50,000
Other Goods
$50,000
$8,000
Educat
b. True. The social welfare function assumes a cardinal interpretation of utility so that comparisons across
people are valid.
c. False. Departures from complete equality raise social welfare to the extent that they raise the welfare of the
person with the minimum level of utility. For example, with the utility functions U L=I and UJ=2I, the social
welfare function W=min[UL,UJ] would allocate twice as much income to Lynne than Jonathan.
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