Answer to Question #271577 in Microeconomics for yazıcı

Question

Let assume, Ann and Bob plan a common activity during lock down. Their alternatives: 

• А - watch a movie;
• B - read a book;
• C - attend a lecture online;
• D - create a TikTok video;
• E - cook a special dish.

Ann’s preferences are designed in such way that utility from alternative A is 22, B - 16, C - 18, D - 25, E - 30.

Bob’s preferences are designed in such way that utility from alternative A is 21, B - 16, C - 4, D - 3, E - 7.

Choose all Pareto-efficient alternatives.

Answer 1

The allocation of resources is considered Pareto efficient if it is not possible to make anyone better off without making someone else worse off.

Having a negative utility shows that the consumer had much of the product such that instead of getting full satisfaction he got dissatisfaction.

Comparing Anna and Bob based on their utility the Pareto efficient alternative will be ;

A-watching a movie for Anna.

C-Attend a lecture online for Bob.

D- Create a TikTok video for Bob.

E-Cook a special dish for Bob.

The best alternative being A that has positive utility.