If through prior trade,the marginal rates of substitution for two goods between two people are equal,we say that the last trade:
A)made one person better off and the other worse off.
B)was Pareto optimal.
C)was Edgeworth final.
D)was inefficient.

Question

Quizplus · Accepted Answer

If the marginal rates of substitution between two goods are equal for two individuals, it implies that they have reached a point where they cannot reallocate goods to make one person better off without making the other worse off. This is known as Pareto optimality. Therefore, the last trade was Pareto optimal.

If Through Prior Trade,the Marginal Rates of Substitution for Two