Asked by Neisha Taylor on Jul 15, 2024
Verified
Absent market imperfections, when firms ________ profits and households ________ utility Pareto optimality has been obtained.
A) maximize; maximize
B) maximize; minimize
C) minimize; maximize
D) minimize; minimize
Pareto Optimality
A situation where resources are distributed in such a way that it's not possible to improve the position of any individual or satisfy a preference more fully without adversely affecting at least one other individual or preference criterion.
Market Imperfections
Situations in which the assumptions of a perfectly competitive market are not met, leading to inefficiencies in market outcomes.
- Comprehend the principle of Pareto efficiency in the distribution and exchange of resources.
Verified Answer
NB
Nyanda BangayJul 17, 2024
Final Answer :
A
Explanation :
In a situation without market imperfections, Pareto optimality is achieved when firms maximize their profits and households maximize their utility. This condition reflects an efficient allocation of resources where no individual can be made better off without making someone else worse off.
Learning Objectives
- Comprehend the principle of Pareto efficiency in the distribution and exchange of resources.