Question:
The Pareto optimality criterion implies fulfillment of all the following conditions except:
The Pareto optimality criterion implies fulfillment of all the following conditions except:
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Pareto optimality is about efficiency in resource allocation, not about fairness in income distribution.
Updated On: Sep 24, 2025
- The marginal rate of transformation between any two goods is equal to the marginal rate of substitution between the same two goods.
- The economy is operating on its production possibility frontier.
- Production techniques embody the most efficient technology.
- Income is distributed fairly among all individuals.
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The Correct Option is D
Solution and Explanation
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:
\[
\boxed{(4) \, \text{Income is distributed fairly among all individuals.}}
\]
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