An allocation of resources is Pareto optimal if
A)it is possible to make one person better off without making at least some others worse off.
B)no further mutually beneficial exchange is possible.
C)it is below the contract curve.
D)it is possible to make everyone else better off.

Question

Quizplus · Accepted Answer

Pareto optimality means that no further mutually beneficial exchange is possible, which is equivalent to saying that no one can be made better off without making someone else worse off. Therefore, option B is the correct answer. Option A is partially correct, but it does not capture the full definition of Pareto optimality. Option C is incorrect because Pareto optimality occurs on the contract curve, not below it. Option D is also incorrect because Pareto optimality does not guarantee that everyone can be made better off, only that no one can be made better off without making someone else worse off.

An Allocation of Resources Is Pareto Optimal If