Question

2 Pareto efficiency and social surplus (x-4, aB) There are two citizens: A and B. An alternative is defined by Individual preferences There are only 3 feasible alternatives: ri = (0,0) (1, 10) represented by u4 (x) = r4, uB (x) = xB. are (2,2), and rs I2 2.1 Which alternatives are Pareto efficient? 2.2 Which alternatives maximize social surplus? Now suppose that A is altruistic and has preferences represented by B = r + 2 2.3 Which alternatives are Pareto efficient? Which alternatives maximize social surplus? 2.4

Answer 1

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