Pareto optimality in an exchange economy with production requires all of the following except:
A)efficiency in consumption.
B)equality in the distribution of goods to consumers.
C)efficiency in production.
D)equality between each consumer's MRS and the economy's MRTS.

Question

Quizplus · Accepted Answer

Pareto optimality in an exchange economy with production requires efficiency in consumption (A), efficiency in production (C), and equality between each consumer's MRS and the economy's MRTS (D). However, it does not require equality in the distribution of goods to consumers (B). In fact, Pareto optimality allows for unequal distribution as long as it is still efficient and there are no possible improvements for any individual without hurting another individual.

Pareto Optimality in an Exchange Economy with Production Requires All