If the Initial Distribution of Two Goods Between Two People

question 114

Multiple Choice

If the initial distribution of two goods between two people is Pareto optimal, which of the following statements is TRUE?

• A) It is possible to reallocate the goods between the two people so as to increase the utility of both people.
• B) It is possible to reallocate the goods between the two people so as to increase the utility of one person without decreasing the utility of the other.
• C) It is possible to reallocate the goods between the two people so as to increase the utility of one person, but only at the expense of the other person.
• D) It is impossible to reallocate the goods between the two people so as to increase either person's utility.
• E) none of the above

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Definitions:

Capital Account

An account on a nation's balance of payments that records transactions involving the acquisition or disposal of assets.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenue.

Personal Use

Personal use denotes utilizing an asset or service for one's own personal needs instead of for business or commercial activities.