Question

The Pareto optimality criterion implies fulfillment of all the following conditions except:

• A. The marginal rate of transformation between any two goods is equal to the marginal rate of substitution between the same two goods.
• B. The economy is operating on its production possibility frontier.
• C. Production techniques embody the most efficient technology.
• D. Income is distributed fairly among all individuals.

Hint:

Pareto optimality is about efficiency in resource allocation, not about fairness in income distribution.

Answer 1

The Correct Option is D

The Pareto optimality criterion focuses on efficiency in resource allocation and does not necessarily address fairness in income distribution. It ensures that the economy operates on the production possibility frontier and that the marginal rate of transformation equals the marginal rate of substitution, which reflects efficient allocation. However, it does not require that income be distributed fairly. Therefore, the correct answer is option (4). Final Answer: \[ \boxed{(4) \, \text{Income is distributed fairly among all individuals.}} \]