Problem: Congress is allocating $1 million of research funding. It can fund research in surfboard safety, B, or in snowmobile safety, S. Since research is measured in dollars, the price of each good is $1.
The utility of each Californian is:
uc(B,S) = √(9B+S)
The utility of all other Americans is:
ua(B,S) = √(4B+6S)
a. To make this decision, Congress uses the social welfare function
W(ua,uc) = 0.9ua + 0.1uc
What is the optimal allocation?