Question

Consider a 2-agent, 2-good economy with an aggregate endowment of 30 units of good 𝑋 and 10 units of good 𝑌. Agent 𝑖 has utility function
ui (xi , yi ) = max {xi , yi }, 𝑖 = 1, 2.
Select the choices below in which the specified allocation of the goods to the agents is Pareto optimal for this economy

• A. (𝑥1, 𝑦1, 𝑥2, 𝑦2 ) = (5, 5, 25, 5)
• B. (𝑥1, 𝑦1, 𝑥2, 𝑦2 ) = (10, 10, 20, 0)
• C. (𝑥1, 𝑦1, 𝑥2, 𝑦2 ) = (30, 0, 0, 10)
• D. (𝑥1, 𝑦1, 𝑥2, 𝑦2 ) = (0, 10, 30, 0)

Answer 1

Answer: (C), (D)

(𝑥1, 𝑦1, 𝑥2, 𝑦2 ) = (30, 0, 0, 10)

Answer 2

The correct options is (C): (𝑥1, 𝑦1, 𝑥2, 𝑦2 ) = (30, 0, 0, 10) and (D): (𝑥1, 𝑦1, 𝑥2, 𝑦2 ) = (0, 10, 30, 0)