Problem:
Let U be the utility obtained by the owner-manager of Good Guys Enterprises, P be the profit, C be the cost of charitable contributions or civic expenditures, and U* be the desired level of utility.
The optimization conditions for obtaining the desired level of utility at the lowest possible cost are:
Maximize U - C
Subject to: U = U*
These conditions differ from the utility-maximizing conditions, which would be:
Maximize U
Subject to: P - C ≥ 0
2.The owner-manager of Good Guys Enterprises obtains utility from income(profit) and from having the firm behave in a socially conscious manner, such as making charitable contributions or civic expenditures. Can you set up the problem and derive the optimization conditions if the owner-manager wishes to obtain a specific level of utility at the lowest possible cost? Do these conditions differ from the utility-maximizing conditions?
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