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

A Pareto optimal allocation of resources is a situation where no further mutually beneficial exchange is possible, meaning that any change that would make one person better off would necessarily make another person worse off. Therefore, option B correctly defines Pareto optimality. Options A and D are incorrect because a Pareto optimal allocation cannot necessarily make everyone better off, nor is it possible to make one person better off without making someone else worse off. Option C is incorrect because a Pareto optimal allocation is always on or above the contract curve, not below it.

An Allocation of Resources Is Pareto Optimal If