Consider an exchange economy with two goods where agents and have the same preferences, with the property: if and are distinct indifferent bundles, then the midpoint is strictly preferred to both (strict convexity). In a Pareto efficient allocation, and
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Consider an exchange economy with two goods where agents i and j have the same preferences, with the property: if (a,b) and (c,d) are distinct indifferent bundles, then the midpoint ((a+c)/2,(b+d)/2) is strictly preferred to both (strict convexity). In a Pareto efficient allocation, i and j (A) will get the same bundle (B) may get different bundles (C) will get the same bundle, provided their endowments are identical (D) will get the same bundle, provided their endowments are identical and the preferences are monotonically increasing
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 2014 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.