A Competitive Equilibrium Is Pareto-Optimal If There Is No Way

question 52

Multiple Choice

A competitive equilibrium is Pareto-optimal if there is no way to rearrange or to reallocate goods so that

• A) anyone can be made better off.
• B) no one can be made worse off.
• C) someone can be made better off without making someone else worse off.
• D) someone can be made better off without making everyone else worse off.
• E) everyone is made better off.

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Definitions:

Consumption Bundle

A combination of goods and services that a consumer chooses to consume within a given time period.

Income

Funds acquired regularly as earnings from employment or investment returns.

Substitution Effect

The change in consumption patterns due to a change in relative prices, holding the consumer's utility level constant.

Income Effect

The change in an individual's consumption choices resulting from a change in real income, due to changes in price.