When the allocation of two goods between two individuals is efficient:
A)the utilities of both the individuals from the consumption of these two goods are equal.
B)both individuals will derive the maximum utility from the consumption of these two goods.
C)the marginal rates of substitution between two goods for both the consumers are the same.
D)the market demand curves in all markets are identical.

Question

Quizplus · Accepted Answer

An efficient allocation occurs when the marginal rates of substitution (MRS) between two goods are equal for both consumers, indicating that neither can be made better off without making the other worse off.

When the Allocation of Two Goods Between Two Individuals Is