Scenario 2: Trader 1 is endowed with 100 identical Left shoes. Trader 2 is endowed with 99 identical Right shoes. Each trader's utility equals the number of complete pairs of shoes in her allocation. Traders trade in competitive markets and reach a competitive equilibrium. Shoes are infinitely divisible.
Given their endowments, an efficient allocation:
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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 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.