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Such a trade would create negative social surplus and

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Unformatted text preview: librium must be between buyer and seller for whom WTP<WTA. Such a trade would create negative social surplus, and thereby reduce the aggregate social surplus. Thus, social surplus must be at a maximum at the equilibrium. B 27 Economics 113 Introduction to Economics for Policy Analysis Review Questions Topic 6 1. A Pareto improvement is A. any reallocation of resources that makes at least one individual better-off and leaves no individual worse-off. B. any reallocation of resources that leaves no individual worse-off. C. any reallocation of resources that makes all individuals better-off. D. All of the above 2. “If allocation A Pareto dominates allocation B then no individual can be worse-off in A than in B”. True of False? A. True. B. False. 3. A potential Pareto improvement is a re-allocation under which A. the winners could in principle fully compensate the losers and still be better off. B. the winners fully compensate the losers but are still better off. C. at least one indi...
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