Suppose a new government policy generates $6,000 of benefits for local businesses and $4,000 of costs. We can best describe the policy as
A) Pareto efficient.
B) inefficient.
C) potentially efficient.
D) equitable.

Question

Quizplus · Accepted Answer

The policy is potentially efficient because the total benefits ($6,000) exceed the total costs ($4,000), suggesting that those who benefit could theoretically compensate those who bear the costs and still be better off, a hallmark of potential efficiency. However, without information on the distribution of costs and benefits among individuals, we cannot determine if it is Pareto efficient or equitable.

Suppose a New Government Policy Generates $6,000 of Benefits for Local