How much extra utility were you able to generate

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Reference no: EM13182803

Traditionally your company has given 2 bottles of Whiskey and 5 Cigars to each worker, but you know that not everyone was happy with that gift. You are authorized to spend no more than $200 per each worker and the price of whiskey is $50 and the price of one cigar is $20.

The workers on the first floor neither smoke nor drink and they used whiskey and cigars to re-gift to their friends and family. Since they don%u2019t consume neither of the gifts themselves, they consider cigars and whiskey to be perfect substitutes and their utility function is represented by the following equation:

U(c,w)=c+4w

The workers on the second floor smoke cigars and drink whiskey and they like to do both at the same time. Their utility function is represented by the following equation:

U(c,w)= $c^3/^4w^1/^4$

Hint: MRS = 3W/C

Finally, workers at the top floor of the building also enjoy Whiskey and Cigars but for each bottle of Whiskey they like to smoke exactly 5 cigars. Their utility function is represented by the following equation:

U(c,w)= min(c,5w)

If you wanted to maximize total utility of all workers, which presents would you give to workers on each floor? How much would it cost the company to provide all these presents? How much extra utility were you able to generate compared to the previous year?

Reference no: EM13182803

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