Question

T/F: Since some retirees might prefer to receive a one-time (lump-sum) payment from SS, rather than the current system’s annual stream of payments for as long as the retirees live, a Pareto improvement would result if retirees were allowed to choose between those two options.

Answer 1

Ans:

The statement is true as Pareto effcient/optmality is a state where one cannot reallocate the resource without making someone worse off, in order to make another person better off.

So, by allowing to choose between the alternatives, the system is providing up an alternative to people(those some not so happy retirees) without hampering the ones who are already happy receiving lump-sum payment. So, a better equilibrium is generated which is now Pareto Efficient.