Question

In: Economics

1.“Among the set of project alternative. the one that yields the largest potential Pareto improvement should...

1.“Among the set of project alternative. the one that yields the largest potential Pareto improvement should be selected” - it refers to Pareto choice or Kaldor-Hicks Criterion?
2. "In cost benefit analysis. A scenario in which everything is held constant.exactly the way it is now. Like snap shot in time "- it refers to counterfactual or Status Quo?

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Expert Solution

1.“Among the set of project alternative. the one that yields the largest potential Pareto improvement should be selected” - it refers to Pareto choice or Kaldor-Hicks Criterion?

pareto efficiency is attained when no can be better off without losing others utility.it refers to the maximising utility to arrive at an optimal allocation of goods.

so yes, it is pareto choice as here there is both wealth maximisation and the utility maximisation

and Kaldor-Hicks Criterion is applied when there is wealth maximisation and not utility maximisation.

2. "In cost benefit analysis. A scenario in which everything is held constant.exactly the way it is now. Like snap shot in time "- it refers to counterfactual or Status Quo?

counterfactual is when , we alter what desired bases on wha had happened or work with the clause, 'what would happen if '

whereas a person maintain the status quo prefer to go for original option, although they might have information about beneficial,still they take the option as less advantageous.

so here we can cionclude it is the status quo situation as there is everything same as before.


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