Assume the Nozick rules are being followed in the economy so that the distribution of income is fair. What must be true for this to create an efficient allocation of resources?
A) The government must allocate resources using a command mechanism.
B) All people are earning equal incomes.
C) There are no public goods, monopolies, high transactions costs, or external costs and benefits.
D) The costs of administering redistribution equals the benefits the poor receive.
E) The government must redistribute income in a fashion that minimises the 'big tradeoff'.

Question

Quizplus · Accepted Answer

Nozick's concept of a fair distribution of income assumes a free market economy with minimal government intervention. In such an economy, the efficient allocation of resources is achieved when there are no market failures such as public goods, monopolies, high transactions costs, or external costs and benefits. Therefore, option C is the correct answer. Option A is incorrect because Nozick's theory opposes a command economy. Option B is incorrect because Nozick does not advocate for an equal distribution of income. Option D is incorrect because Nozick's theory does not prioritize the costs of administering redistribution. Option E is incorrect because Nozick's theory does not prioritize redistribution but rather emphasizes the importance of free markets and minimal government intervention.

Assume the Nozick Rules Are Being Followed in the Economy