3. Anita (A), Ben (B) and Carlos (C) are housemates who have moved to a new house andmust decide how to allocate rooms X, Y and Z.An 'allocation' is where each housemate is assigned to exactly one room. For example,Anita → Room Z, Ben → Room X and Carlos → Room Y is allocation (Z, X, Y).Utilities for each room are given below:Room XUtility for A7Utility for B9Utility for C 2Room Y437Room Z214 (d) Which of the Pareto optimal allocations maximise total surplus (utility) andwould all housemates weakly prefer this allocation over any other?(e) Suppose the housemates decide to allocate the rooms by randomly assigning RoomX to someone, Room Y to someone and Room Z to someone. Explain whether thisalways leads to an allocation which is Pareto optimal or maximises total surplus.(f) Suppose the housemates decide to allocate the rooms according to the 'randomserial dictatorship' rule studied in lectures.Explain what this rule is and whether in this case it always leads to an allocationwhich is Pareto optimal or maximises total surplus.

(d) To determine the Pareto optimal allocations that maximize total surplus, we need to find the…

imal allocations maximise total surplus (utility) and eakly prefer this allocation over any other? s decide to allocate the rooms by randomly assigning F o someone and Room Z to someone. Explain whether tion which is Pareto optimal or maximises total surplu s decide to allocate the rooms according to the 'rando

imal allocations maximise total surplus (utility) and eakly prefer this allocation over any other? s decide to allocate the rooms by randomly assigning F o someone and Room Z to someone. Explain whether tion which is Pareto optimal or maximises total surplu s decide to allocate the rooms according to the 'rando

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.1P

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