I find it more surprising that everyone didn't choose the first option. Even though $100,000 is more than $50,000, in terms of purchasing power it's all about relativity. The more other people earn given the same productivity, the higher prices will be overall and the less purchasing power you'll have.
For example, if you gave everyone $10m and I only got $2m.. I'd still be a "millionaire" but inflation would go through the roof and I'd still end up with rather little compared to everyone else.
A friend of mine was meeting a guy for a potential arranged marriage. She had a good job working for a large investment bank. A deal killer for the potential husband: the wife can't make more money than him. This was VERY important to him, literally the second or third question he asked her.
(Him being a jackass was a deal killer for her.)
It works the same way for education and other services. The only advantage to an increased economy when you fall behind is hard goods which are not that important. I don't care if I can buy a 70" TV if I can't pay for housing. etc.
a) I live a postdoc lifestyle, everyone else lives a grad student lifestyle.
b) I live a full professor lifestyle, everyone else lives an investment banker lifestyle.
World b just has more goods in it than world a. That's not a paradox; Earth 2008 has far more goods in it than Earth 1908.
The question is just too hard to interpret. "Standard of living" is very complicated and can't really be reduced to "purchasing power", nor to "purchasing power plus envy". There are a lot of things which money can't buy, or which money can buy but which are scarce no matter how affluent the society is.
I won't comment on their feelings ("a sense of security"), or their ability to socialize with Angelina Jolie.
In any case, by "lifestyle" I simply meant "material standard of living". I.e., $25,000, $50,000, or $100,000 worth of consumer goods and services as measured in 2008 dollars.