Allocation of money-maximizes utilitarian social welfare

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An economy has $72, to divide between Hamlet and Ophelia. Hamlet has the utility function u[H] = U[H] (m[H]) = 3m[H], where m[H] denotes his quantity of money. Ophelia has the utility function u[O]= U[O](m[O]) = 42sqrt(m[O]), where m[O] denotes her quantity of money.

[H] means ("sub-H"), and [O] means ("sub-O")

(a) What are the Pareto efficient allocations of the $72?

(b) Calculate the allocation of money that maximizes utilitarian social welfare. In that allocation, what is the maximized value of social welfare? How much money does Hamlet receive? How much money does Ophelia receive?

Reference no: EM13974648

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