Ch31


Is it possible to have a Pareto efficient allocation where someone is worse off than he is at an allocation that is not Pareto efficient?
Ans: Yes For example, consider the allocation where one person has everything. Then the other person is worse off at this allocation than he would be at an allocation where he had something.

Is it possible to have a Pareto efficient allocation where everyone is worse off than they are at an allocation that is not Pareto efficient ?
Ans: No.For this would mean that at the allegedly Pareto efficient allocation there is some way to make everyone better off, contradicting the assumption of Pareto efficiency.

True or false? If we know the contract curve, then we know the outcome of any trading.
A: If we know the contract curve, then any trading should end up somewhere on the curve ; however , we do not know where.

Can some individual be made better off if we are at a Pareto efficient allocation ?
Ans:Yes, but not without making someone else worse off.

If the value of excess demand in 8 out 10 market is equal to zero, what must be true about the remaining two markets?
A: The value of excess demand in the remaining two market s must sum to zero.
Last modified: Wednesday, 18 December 2013, 04:49 PM