Economic efficiency is achieved
A)automatically in a capitalist economy
B)when every possible Pareto improvement is exploited
C)when all markets are monopolized
D)if income is fairly distributed
E)whenever a voluntary transaction takes place

Question

Quizplus · Accepted Answer

Economic efficiency is achieved when every possible Pareto improvement is exploited. This means that it is not possible to rearrange resources to make someone better off without making someone else worse off. This condition is one of the key criteria for Pareto efficiency and economic efficiency. A capitalist economy does not automatically ensure economic efficiency, as there may be market failures and externalities that cause inefficiencies. Monopolizing all markets does not lead to economic efficiency, as it can lead to reduced competition and higher prices. The distribution of income does not directly affect economic efficiency. While voluntary transactions are important for a functioning market economy, they alone do not guarantee economic efficiency.

Economic Efficiency Is Achieved