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Thomas is a wealthy shipping merchant who is part of the Constitutional Convention in Philadelphia. Because of his profession, he is mostly concerned with how the new form of government will improve interstate and foreign commerce and wants to ensure that the plan that is adopted will benefit his interests. Which plan will Thomas likely favor?
Pareto Efficient
A scenario in which it is impossible to improve the status of any individual or preference without adversely affecting at least one other individual or preference.
Negative Externalities
Costs suffered by a third party as a result of an economic transaction in which they were not involved, such as pollution.
Positive Externalities
Benefits that affect parties who did not choose to incur that benefit.
Pareto Optimal
A state of distributing resources that precludes the possibility of augmenting the status of any participant or preference without detriment to another.
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