Two goods are allocated efficiently between consumers when _____.
A)the quantities of goods they consume are equal
B)the marginal rates of substitution between the two goods are the same for both consumers
C)there can be further exchanges that will make both consumers better off
D)redistribution makes one consumer better off at the expense of the other

Question

Quizplus · Accepted Answer

Efficiency in allocating two goods between consumers occurs when the marginal rates of substitution (MRS) for both consumers are the same. This means that the consumers are willing to trade off the same amount of one good for another, indicating an equal level of satisfaction. If the MRS is not equal between consumers, there may be further exchanges that could make both consumers better off. Option A is not necessarily efficient, as the quantities of goods consumed by each consumer may differ in terms of utility or satisfaction. Option D refers to a situation of redistribution, which is not related to the efficiency of the initial allocation between consumers.

Two Goods Are Allocated Efficiently Between Consumers When _____