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. Agent 1 has the utility function and agent 2 has the utility function .
Which of the following allocations is not Pareto efficient? (Each allocation is agent 1's bundle followed by agent 2's bundle.)
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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. Agent 1 has the utility function u₁=min {x₁,y₁} and agent 2 has the utility function u₂=x₂+y₂. Which of the following allocations is not Pareto efficient? (Each allocation is agent 1's bundle followed by agent 2's bundle.) (A) (2,0),(4,4) (B) (4,4),(2,0) (C) (2,2),(4,2) (D) (0,0),(6,4)
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. Agent 1 has the utility function u_1=min {x_1,y_1} and agent 2 has the utility function u_2=x_2+y_2. Which of the following allocations is not Pareto efficient? (Each allocation is agent 1's bundle followed by agent 2's bundle.)
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 2016 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.