A Pareto preferred transaction is one where
A)The loser in a transaction loses less than the gainer gains
B)All must gain welfare compared with the pre-transaction position
C)No one loses and at least one person gains in the transaction
D)The consumers must have moved to the contract curve

Question

Quizplus · Accepted Answer

In a Pareto preferred transaction, no one loses and at least one person gains in the transaction. This means that the transaction results in a net increase in societal welfare, without any individual being worse off. Option A is not sufficient as it only ensures that the loser is losing less than the gainer is gaining. Option B is incorrect as it implies that everyone must gain from the transaction, which may not be the case in a Pareto improvement. Option D relating to the movement to the contract curve is not always required for a Pareto preferred transaction.

A Pareto Preferred Transaction Is One Where