Suppose that we have $40,000 to be split between two people, Jane and Fred. The income...

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Suppose that we have $40,000 to be split between two people, Jane and Fred. The income and marginal utility for each of them

business economics

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Answer 1

Answer #1

Ans. In order to maximize the combined utility of Jane and Fred, allocation of the money should be made where:

MU of Jane's last dollar spent = MU of Fred's last dollar spent

This happens when both enjoy a MU of 90 and the allocation of money is:

Amount to Jane = $10,000

Amount to Fred = $30,000

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Answer 2

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