Question

1-n Problem 5. (Equity weights.) (20 points.) The average GDP per capita is $16,000 worldwide, and $59,000 in the US.? If the utility functions of the various countries in the world used by the social regulator are U(cc)=C, where ce=GDP per capita in country c, and n=0.5, what equity weight should be used... a. for the US? b. For a country with GDP per capita equal to $8,000?

Answer 1

worldwide: $16,000 UCC) - Cin U.S. : $59,000 1-n Cc - GDP free capake in country c n=0.5 UCU.S)=59,000 0.5 = ($59.000 10.5 -0.5 - =485.7983 equity weight = 485.7983 - To oooo) 16,000 -10.0303 1 U(8,000) = 80000.5 a i 178. sc. 178.8854 0.5 equity weight = 178.8854 - 10.oll17 16, ooo