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Questions › DSE › DSE 2006 › Q30
2 marksMicroeconomics › Welfare economics and social choice › Pareto efficiency and Pareto improvementsHardabout 3 min

DSE 2006 Question 30: Welfare economics and social choice

There are two individuals AAA and BBB. The utility function of both individuals are identical and given by u(x,y)=max⁡{x,y}u(x,y)=\max\{x,y\}u(x,y)=max{x,y}. Each of them has 111 unit of good xxx and 111 unit of good yyy. Which of the following is a Pareto optimal allocation?

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Plain-text version

There are two individuals A and B. The utility function of both individuals are identical and given by u(x,y)=max {x,y}. Each of them has 1 unit of good x and 1 unit of good y. Which of the following is a Pareto optimal allocation? (A) A has x=1,y=1 and B has x=1,y=1 (B) A has x=2,y=0 and B has x=0,y=2 (C) A has x=0,y=0 and B has x=2,y=2 (D) A has x=3/2,y=1/2 and B has x=1/2,y=3/2

Welfare economics and social choice has come up 62 times in 6 exams since 2004.

What this question tests

This question is on Pareto efficiency and Pareto improvements, part of Welfare economics and social choice in Microeconomics.

What it means for an allocation to be efficient, checked in exchange economies and other settings.

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