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Define and explain the criteria for a "Pareto Optimum" allocation of resources. What sources of market failure might prevent the attainment of this optimum?
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TITLE: DEFINE AND EXPLAIN THE CRITERIA FOR A "PARETO OPTIMUM" ALLOCATION OF RESOURCES. WHAT SOURCES OF MARKET FAILURE MIGHT PREVENT THE ATTAINMENT OF THIS OPTIMUM? Every society possesses a limited and, at least in the short-term, a fixed quantity of economic resources. These resources, or factors of production, as they are often called, are the inputs to the production process, from which a vast quantity of economic goods and services emerge, ultimately going to satisfy consumers wants in one form on another. The total quantity of economic resources at any point in time is made up of a great variety of heterogeneous items, which can only loosely be ascribed to one or other of the four recognized categories: land, labor, capital and enterprise. An economy is efficient when it provides its consumers, with the most desired set of goods and services, given the resources and technology of the economy. The...
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