Question

Suppose there are two consumers, A and B. There are two goods, X and Y. There is a TOTAL of 8 units of X and a TOTAL of 8 units of Y. The consumers’ utility functions are given by:

UA(X,Y) = 4X + Y

UB(X,Y) = X*Y

For each of the following allocations, write TRUE if it is Pareto Efficient and FALSE if it is not:

i) Consumer A gets 6 units of X and 2 units of Y, and Consumer B gets 2 units of X and 6 units of Y.

ii) Consumer A gets 4 units of X and 6 units of Y, and Consumer B gets 4 units of X and 2 units of Y.

iii) Consumer A gets 7 units of X and 0 units of Y, and Consumer B gets 1 unit of X and 8 units of Y.

iv) Consumer A gets 4 units of X and 0 units of Y, and Consumer B gets 4 units of X and 8 units of Y.

Answer 1