The trade-off between equity and efficiency occurs because:
A)the efficient allocation of resources is bad for business and industry.
B)allocating resources fairly may cause inefficiency.
C)everyone must pay more tax to ensure equity.
D)efficiency is politically unpopular.

Question

Quizplus · Accepted Answer

Allocating resources fairly may cause inefficiency because it may require redistributing resources from those who are more productive to those who are less so, in order to achieve a more equitable outcome. This can create disincentives for people to work hard, invest or innovate, resulting in lower levels of productivity, growth and welfare in the economy. A balance needs to be struck between equity and efficiency to achieve a socially optimal outcome.

The Trade-Off Between Equity and Efficiency Occurs Because