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

A Pareto superior allocation improves at least one individual's welfare without diminishing anyone else's. This concept is fundamental to welfare economics. Hence, the correct answer is (b).