Use the following information toanswer the next two questions:

Suppose society consists of two individuals, A and B, who mustsplit a fixed income of $100. Individual A’s marginal utility ofincome is given by MU_A=400-8I_A and individualB’s marginal utility of income is given byMU_B=800-4I_B.

17. If the social welfare function is given byW=U_A+U_B, then at the optimal distribution of          income,social welfare (W) is _______________.

18. Suppose instead that the socialwelfare function is given by W=U_A, then at the optimaldistribution of income, social welfare (W) is ______________.

Use the following information toanswer the next three questions:

Consider an altruistic individual whose utility function isgiven by U=f(I_self,I_charity). Their marginalbenefit of donating to charity (i.e. those in need) is given byMPB=200-I_charity and their marginal cost of donating tocharity is given by MPC=4I_charity. This individual’sdonations also result in marginal external benefits to thirdparties (those who benefit from knowing that donations are beingmade to those in need), given by MEC=5. Using a graph with dollarson the vertical axis and I_charity on the horizontalaxis, answer the following questions.

19. This individual will voluntarily donate $ ______________tocharity.

20. The deadweight loss associated with this individualvoluntarily donating to charity is

      $_____________.

21. To encourage this individual tovoluntarily donate the socially efficient amount to charitygovernment would need to offer this individual a tax credit in theamount of $_____________.