An economy has $90 to divide between Katherina and Bianca. Katherina’s utility function is
UK(xK) = xK½, where xK represent her allocation of dollars. Bianca’s utility function is UB(xB) = xB¼, where
xB represents her allocation of dollars.
(a) Which allocations of $90 are exchange efficient?
(b) Calculate the allocation that maximizes utilitarian welfare.
(c) Calculate the allocation that maximizes Rawlsian welfare.