Suppose you live on the main floor of a house. The person who lives upstairs performs aerobic exercises every night during your favorite T.V. program. Which of the following behaviours does not represent a Pareto- improvement?
A)You tape the program and watch it later.
B)Your neighbor pays you $20 to miss your program.
C)Your neighbor accepts $20 to exercise while you are out.
D)You complain to the manager, who evicts your neighbor.

Question

Quizplus · Accepted Answer

A Pareto improvement is a situation where a change in allocation benefits at least one person without making anyone else worse off. Options A, B, and C all represent scenarios where both parties could potentially benefit without detriment to the other (you get to watch your program without disturbance, or there's a financial compensation involved). Option D, however, involves evicting the neighbor, which clearly makes the neighbor worse off, thus not representing a Pareto improvement.

Suppose You Live on the Main Floor of a House