Consider an economy of at least 3 individuals with every individual having strictly monotonically increasing utility functions. Let state be Pareto superior to state . Then,
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1 mark, −0.33MicroeconomicsWelfare economics and social choicePareto efficiency and Pareto improvementsHardabout 3 min
UoH 2015 Question 28: Welfare economics and social choice
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Consider an economy of at least 3 individuals with every individual having strictly monotonically increasing utility functions. Let state Y be Pareto superior to state X. Then, (A) Everyone is better off in state Y compared to being in state X. (B) There exists a state Z obtained from a re-distribution of state Y such that everyone is better off in state Z compared to being in state X. (C) One person is better off in state Y compared to being in state X and everyone else is indifferent between states X and Y. (D) Everyone is better off in any re-distribution of state Y compared to being in state X.
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.
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