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Questions › DSE › DSE 2010 › Q56
2 marksMicroeconomics › Welfare economics and social choice › Pareto efficiency and Pareto improvementsHardabout 4 min

DSE 2010 Question 56: Welfare economics and social choice

Consider an economy with two agents AAA and BBB and two goods x1,x2x_{1},x_{2}x1​,x2​. Both agents treat x1x_{1}x1​ and x2x_{2}x2​ as perfect complements. The total endowment of x1x_{1}x1​ is 4 and of x2x_{2}x2​ is 2. Which allocation is not Pareto optimal? (A bundle (a,b)(a,b)(a,b) is aaa units of x1x_{1}x1​ and bbb of x2x_{2}x2​.)

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Plain-text version

Consider an economy with two agents A and B and two goods x₁,x₂. Both agents treat x₁ and x₂ as perfect complements. The total endowment of x₁ is 4 and of x₂ is 2. Which allocation is not Pareto optimal? (A bundle (a,b) is a units of x₁ and b of x₂ .) (A) A gets (1,1) and B gets (1,1) (B) A gets (2,1) and B gets (3/2,1) (C) A gets (1/2,3/2) and B gets (3,1/2) (D) A gets (3,2) and B gets (0,0)

Also written as: Consider an economy with two agents A and B and two goods x_1,x_2. Both agents treat x_1 and x_2 as perfect complements. The total endowment of x_1 is 4 and of x_2 is 2. Which allocation is not Pareto optimal? (A bundle (a,b) is a units of x_1 and b of x_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.

TestStop has 40 past-paper questions on this subtopic.

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Question from the DSE 2010 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.