a) What event budget would maximize the social welfare function W = UA + UB? (b) If households privately decide how much to contribute to the event budget, whatwill the total budget be? Consider a community of two families A and B, who contribute EA and EB dollars tothe community's events budget. Community events are a public good and the totalquality of events provided E = EA + EB.Assume each family has an annual income of $60 which it splits between the eventsbudget and all other consumption spending X. Family utility functions aregiven by UA = XA^1/2 E^1/2 and UB = XB^1/2E^1/2.

Utility function (A) = xA1/2E1/2 Utility function (B) = xB1/2E1/2 Income of both A & B = 60…

Answered: a) What event budget would maximize the…

a) What event budget would maximize the social welfare function W = UA + UB? (b) If households privately decide how much to contribute to the event budget, what will the total budget be?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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