Asked by Ja'Lisa Hicks on Apr 29, 2024
Verified
Which statement is FALSE?
A) Efficiency exists when an economy realizes the maximum possible gains from trade given the available resources.
B) If an economy is efficient,it is possible to make only a few people better off without reducing other individuals' economic welfare.
C) Economic efficiency exists when all opportunities to make people better off have been fully exploited.
D) Free markets usually lead to efficiency,but not necessarily equity.
Economic Efficiency
A state in which resources are ideally distributed to best meet the needs of every person or entity, reducing waste and inefficiency to a minimum.
Gains From Trade
The benefits that parties obtain from engaging in voluntary exchange of goods or services.
Free Markets
Economic systems where prices for goods and services are determined by the open market and consumers, with minimal government intervention.
- Acquire knowledge of the notion of efficiency in the context of an economy and the way it is characterized.
- Recognize the situations in which market mechanisms fail and the importance of regulatory actions to resolve these failures.
Verified Answer
JS
Jackson SchenkApr 30, 2024
Final Answer :
B
Explanation :
If an economy is efficient, it is possible to make some people better off only by making others worse off. This is because efficiency simply means that resources are being allocated to their highest valued use, not necessarily that everyone is benefiting equally. In fact, it is possible for some individuals to be worse off in an efficient economy if the resources are being allocated to goods or services that they do not value as much. Therefore, statement B is false.
Learning Objectives
- Acquire knowledge of the notion of efficiency in the context of an economy and the way it is characterized.
- Recognize the situations in which market mechanisms fail and the importance of regulatory actions to resolve these failures.