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4. Your are the social planner for a world with three people. There are 8 possible outcomes which give each individual the utility (in "utils") shown in the table below. Outcome A D G Н Utility of Individual #1 Utility of Individual #2 Utility of Individual #3 You like all these individuals, although not necessarily equally. 2 13 15 13 3 14 4 12 13 12 18 4 14 5 15 24 11 3 5 17 12 18 (a) Which outcomes are Pareto Efficient? Which are not? Explain your reasoning. (b) As an economist, which of the Pareto Efficient outcomes is the most desirable? Explain. (c) As an economist, would you choose one of the outcomes that is not Pareto Efficient? Explain. (d) Suppose the "world" is initially at an allocation that is not Pareto Efficient. Will all of the Pareto Efficient outcomes identified in part (a) be a Pareto Improvement? Explain.

4. Your are the social planner for a world with three people. There are 8 possible outcomes which give each individual the utility (in "utils") shown in the table below. Outcome A D G Н Utility of Individual #1 Utility of Individual #2 Utility of Individual #3 You like all these individuals, although not necessarily equally. 2 13 15 13 3 14 4 12 13 12 18 4 14 5 15 24 11 3 5 17 12 18 (a) Which outcomes are Pareto Efficient? Which are not? Explain your reasoning. (b) As an economist, which of the Pareto Efficient outcomes is the most desirable? Explain. (c) As an economist, would you choose one of the outcomes that is not Pareto Efficient? Explain. (d) Suppose the "world" is initially at an allocation that is not Pareto Efficient. Will all of the Pareto Efficient outcomes identified in part (a) be a Pareto Improvement? Explain.

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter7: Uncertainty
Section: Chapter Questions
Problem 7.8P
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4. Your are the social planner for a world with three people. There are 8 possible outcomes which give each individual the utility (in "utils") shown in the table below. Outcome A D G Н Utility of Individual #1 Utility of Individual #2 Utility of Individual #3 You like all these individuals, although not necessarily equally. 2 13 15 13 3 14 4 12 13 12 18 4 14 5 15 24 11 3 5 17 12 18 (a) Which outcomes are Pareto Efficient? Which are not? Explain your reasoning. (b) As an economist, which of the Pareto Efficient outcomes is the most desirable? Explain. (c) As an economist, would you choose one of the outcomes that is not Pareto Efficient? Explain. (d) Suppose the "world" is initially at an allocation that is not Pareto Efficient. Will all of the Pareto Efficient outcomes identified in part (a) be a Pareto Improvement? Explain.
Transcribed Image Text:4. Your are the social planner for a world with three people. There are 8 possible outcomes which give each individual the utility (in "utils") shown in the table below. Outcome A D G Н Utility of Individual #1 Utility of Individual #2 Utility of Individual #3 You like all these individuals, although not necessarily equally. 2 13 15 13 3 14 4 12 13 12 18 4 14 5 15 24 11 3 5 17 12 18 (a) Which outcomes are Pareto Efficient? Which are not? Explain your reasoning. (b) As an economist, which of the Pareto Efficient outcomes is the most desirable? Explain. (c) As an economist, would you choose one of the outcomes that is not Pareto Efficient? Explain. (d) Suppose the "world" is initially at an allocation that is not Pareto Efficient. Will all of the Pareto Efficient outcomes identified in part (a) be a Pareto Improvement? Explain.
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