Welfare analysis, Microeconomics

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Welfare Analysis

1-Of the following four institutions for allocating apartment to different people at different prices

  i.  The competitive market

 ii.  A discriminating monopolist

 iii. An ordinary monopolist

 iv. Rent control

a. Which one of the above four institutions are best and why? (In answering this question you need to define what is socially "good". This is not easy. Your primary guidance is your gut feelings however before you express your feelings to others you need to rationalize them and make them defensible. Pareto optimality is often used by a number of economists to discern various social states. )

b. Can you think of a situation where your answer in (a) is no longer your preferred institution?

c. Are your answers in (a) and (b) objective and value free? Explain. 

2- Consider a society in which a few people have everything and a great many of them have virtually nothing something like slavery, evaluate this society in terms of Pareto efficiency.


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