Microeconomics: Principles, Problems, & Policies, 20th Edition

Published by McGraw-Hill Education
ISBN 10: 0077660811
ISBN 13: 978-0-07766-081-9

Chapter 21 - Income Inequality, Poverty, and Discrimination - Review Questions: 4

Answer

Redistribute income from Victoria to Fredrick

Work Step by Step

Marginal utility for the last dollar spent for 1. Victoria is 10 utils 2. Fredrick is 15 utils Redistributing income from Victoria to Fredrick till their marginal utilities for the last dollar spent become equal will maximize the combined total marginal utility. This is because the redistributed income will give more marginal utility to Fredrick than it was giving to Victoria and thus the combined total utility will be maximized.
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