The distinction between efficiency and equity can be described as follows:
A)Efficiency refers to maximizing the number of trades among buyers and sellers; equity refers to maximizing the gains from trade among buyers and sellers.
B)Efficiency refers to minimizing the price paid by buyers; equity refers to maximizing the gains from trade among buyers and sellers.
C)Efficiency refers to maximizing the size of the pie; equity refers to producing a pie of a given size at the least possible cost.
D)Efficiency refers to maximizing the size of the pie; equity refers to distributing the pie fairly among members of society.

Question

Quizplus · Accepted Answer

Efficiency refers to maximizing the size of the pie, which means producing as much output as possible with given resources. On the other hand, equity refers to distributing the output fairly among members of society, such as ensuring that everyone has access to basic necessities like food, housing, and healthcare. This distinction is important because policies that promote efficiency (such as reducing regulations and lowering taxes) may not necessarily lead to greater equity. Conversely, policies that promote equity (such as progressive taxation and social welfare programs) may not lead to greater efficiency. Thus, policymakers must strike a balance between efficiency and equity to achieve optimal outcomes for society as a whole.

The Distinction Between Efficiency and Equity Can Be Described as Follows