When two commodities X and Y must be allocated among consumers, a necessary condition for distributive efficiency is that:
A)all firms be price takers.
B)all firms minimize cost.
C)commodity X must be allocated to the consumers with the largest values of MRSXY
D)the marginal rates of substitution MRSXY for all consumers must be equal.

Question

Quizplus · Accepted Answer

Distributive efficiency, also known as allocative efficiency, occurs when goods are distributed in a way that maximizes total utility. For this to happen with two commodities, X and Y, the marginal rates of substitution (MRSXY) between these commodities must be equal for all consumers. This ensures that no one can be made better off without making someone else worse off, achieving an optimal allocation of resources.

When Two Commodities X and Y Must Be Allocated Among