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Questions › IIT JAM › IIT JAM 2023 › Q32
2 marksMicroeconomics › Welfare economics and social choice › Pareto efficiency and Pareto improvementsHardabout 3 min

IIT JAM 2023 Question 32: Welfare economics and social choice

A 2-agent, 2-good economy has aggregate endowment 303030 of XXX and 101010 of YYY, with ui(xi,yi)=max⁡{xi,yi}u_i(x_i,y_i)=\max\{x_i,y_i\}ui​(xi​,yi​)=max{xi​,yi​}. Which allocations (x1,y1,x2,y2)(x_1,y_1,x_2,y_2)(x1​,y1​,x2​,y2​) are Pareto optimal?

Select all that apply.

Answer and worked solution

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Plain-text version

A 2-agent, 2-good economy has aggregate endowment 30 of X and 10 of Y, with uᵢ(xᵢ,yᵢ)=max {xᵢ,yᵢ}. Which allocations (x₁,y₁,x₂,y₂) are Pareto optimal? (A) (5,5,25,5) (B) (10,10,20,0) (C) (30,0,0,10) (D) (0,10,30,0)

Also written as: A 2-agent, 2-good economy has aggregate endowment 30 of X and 10 of Y, with u_i(x_i,y_i)=max {x_i,y_i}. Which allocations (x_1,y_1,x_2,y_2) are Pareto optimal?

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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