Question

why is thia answer pareto efficient?

THE NEXT TWO QUESTIONS ARE BASED ON THE FOLLOWING SITUATION: Lemur, Monkey, and Chimpanzee must decide how to split up the three bedrooms (red, blue, and yellow) in the house that they are renting. Lemur values the red bedroom at $700, the blue bedroom at $400, and the yellow bedroom at $100. Monkey values the red bedroom at $500, the blue bedroom at $100, and the yellow bedroom at $300. Chimpanzee values the red bedroom at $300, the blue bedroom at $200, and the yellow bedroom at $100. The bedrooms are indivisible. No animal can use more than one bedroom. (That is, the marginal value of a second or third bedroom is $0.) 8. Which of the following splits is efficient? a) Lemur gets the red bedroom, Monkey gets the blue bedroom, and Chimpanzee gets the yellow bedroom. b) Lemur gets the blue bedroom, Monkey gets the red bedroom, and Chimpanzee gets the yellow bedroom. C) Lemur gets the yellow bedroom, Monkey gets the blue bedroom, and Chimpanzee gets the red bedroom. d) None of these splits are efficient. e) All of these splits are efficient.

Answer 1

8. Option A - rent value is 700+100+100 ( values as mentioned in the question) = $900

Option B - rent value is 400+500+100 = $1,000

Option C - 100+100+300 = $500

No other option is efficient as the option C. hence option Cis the efficient split