Consider an exchange economy with two agents, 1 and 2, and two goods, and . There are 6 units of and 4 units of available. An allocation is with and . Agent 1 has utility and agent 2 has . Which of the following allocations is not Pareto efficient?
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Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y. There are 6 units of X and 4 units of Y available. An allocation is (x₁,y₁),(x₂,y₂) with x₁+x₂=6 and y₁+y₂=4. Agent 1 has utility u₁=min {x₁,y₁} and agent 2 has u₂=min {x₂,y₂}. Which of the following allocations is not Pareto efficient? (A) (2,2),(4,2) (B) (3,2),(3,2) (C) (3,1),(3,3) (D) (1,2),(5,2)
Also written as: Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y. There are 6 units of X and 4 units of Y available. An allocation is (x_1,y_1),(x_2,y_2) with x_1+x_2=6 and y_1+y_2=4. Agent 1 has utility u_1=min {x_1,y_1} and agent 2 has u_2=min {x_2,y_2}. Which of the following allocations is not Pareto efficient?
Welfare economics and social choice has come up 62 times in 6 exams since 2004.
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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Question from the DSE 2011 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.