You value your favorite shirt at $110. Someone else values it at $150, and that person is willing to pay you $120 for your shirt. Would selling your shirt to this person for $120 be Pareto efficient?
You value your favorite shirt at $110. Someone else values it at $150, and that person is willing to pay you $120 for your shirt. Would selling your shirt to this person for $120 be Pareto efficient?
| No, because you did not receive the maximum amount the other person would have been willing to pay for the shirt. |
| No, the person paid you $120 for the shirt so his net benefit was $30, while your net benefit was $10. For this change to be Pareto efficient, each of you should have the same net benefit. |
| Yes, because even though you gain from the trade and he loses, there is the potential for you to compensate him for his loss. |
| Yes, because both of you are better off as a result of the trade. |
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