How should he divide the cash

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Al has found $1,000 and has decided to divide it between his children, Bud and Kelly. Suppose that Bud is rich and Kelly is poor. Assume that the marginal utility provided by a dollar declines the richer you are. If Al is concerned with increasing both of his children's happiness equally with his money, how should he divide the cash?

He should give $1,000 to Bud and nothing to Kelly.

He should give Bud and Kelly each $500.

He should give more than $500 to Bud and less than $500 to Kelly.

He should give more than $500 to Kelly and less than $500 to Bud.

Reference no: EM131090441

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