A government policy generates $10,000 of benefits to underprivileged youth at a cost of $5,000 to taxpayers. The policy is Pareto efficient.

Question

Quizplus · Accepted Answer

The policy is not Pareto efficient because it makes taxpayers worse off, even if underprivileged youth benefit. Pareto efficiency requires that no one can be made better off without making someone else worse off, and in this case, taxpayers are made worse off.

A Government Policy Generates $10,000 of Benefits to Underprivileged Youth