Problems attached. No graphs required, simple computations only.© BrainMass Inc. brainmass.com October 16, 2018, 11:23 pm ad1c9bdddf
1. UA = 5 + Sqrt(MA)
UB = Sqrt(MB)
MA + MB = 25
If the society has utilitarian social welfare functional then total utility is given by
SWF = UA + UB = 5 + Sqrt(MA) + Sqrt(MB)
(i) MA = 16 and MB = 9
Then SWF = 5 + Sqrt(16) + Sqrt(9) = 5 + 4 + 3 = 12
(ii) MA = 9 and MB = 16
Then SWF = 5 + Sqrt(9) + Sqrt(16) = 5 + 3 + 4 = 12
(b) To solve what distribution maximizes social welfare we have to consider the case where the marginal utility per dollar is the same. This condition maximizes total utility.
MU_x/P_x = MU_y/P_y
Since we do not have prices here, we just consider the case where the marginal utilities are the same. The marginal utility for A is 0.5 Sqrt(MA) and that of B is 0.5 Sqrt (MB). Utility is maximized when
0.5 Sqrt(MA) = 0.5 Sqrt (MB)
This is possible when MA = MB = 0 or MA = MB.
SWF = 5 + Sqrt(12.5) + Sqrt(12.5) = 12.071 > 12 as we obtained ...
Calculate the tax revenue generated for the government and tax burden for the buyers and sellers.
Important information about Northland Physical Therapy
Comprehensive Review Problem: From Recording Transactions (including adjusting Journal Entries) to Preparing Financial Statements and Closing Journal Entries (Chapters 2, 3, and 4) Drs. Glenn Feltham and Gary Entwistle began operations of their physical therapy clinic called Northland Physical Therapy on January 1, 2005. The annual reporting period ends December 31. The trial balance on January 1, 2006, was as follows (the amounts are rounded to thousands of
dollars to simplify):