Question

An allocation for agents in an economy, x, is said to be Pareto superior to another allocation y if moving from allocation y to allocation x:

• A. Increases some people's welfare while reducing others' welfare
• B. Increases all agents' welfare
• C. Increases no agents' welfare
• D. Creates a fiscal deficit

Hint:

Recall what Pareto superior means.

Answer 1

The Correct Option is B

An allocation is Pareto superior if it results in an improvement in at least one individual's welfare without reducing the welfare of anyone else. This is an essential concept in welfare economics. Hence, the correct answer is (b).