· Consider two countries where each has a comparative advantage in an industry. In the absence of
government intervention, will trade occur between these two countries? Is everyone better off as a result of trade? Will both countries gain from trade? Why or why not?
· Under what conditions would you not want to use the Pareto principle to analyze government policies?
· What rules would you impose for making interpersonal comparisons to evaluate the desirability of government policies? Why?
· Why might you expect Rawls' welfare rule to lead to a relatively equal distribution of income?
· Can the Pareto criterion always be used to decide whether one government policy is better than another or one allocation is better than another?
' Would Rawls' welfare rule be easier or more difficult to apply if individuals have widely varying utility functions?
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