Production efficiency occurs when resources are efficiently used to produce a good or service. Allocative efficiency is where resources are efficiently allocated towards producing a good or service, therefore avoiding under or overproduction of a good or service. How one can check if there is under or overproduction of a good or service, we compare marginal benefits with marginal costs. If marginal benefits are less than marginal costs there is an overproduction, and there is an underproduction if marginal benefits are more than marginal cost. When marginal benefits are equal to marginal costs there is allocative efficiency.
For Pareto optimality to work there are assumptions that economists must make, though it does not mean they are plausible. Normative welfare economists try to steer clear of answering moral questions, such as the redistribution of wealth and income amongst the members of a society. Which is why they have adopted the principle of minimal benevolence, which states that “all other things being equal it is morally a good thing and permissible that …show more content…
Again that is not the case, welfare economists had to make a lot of assumptions in order to justify inequality, I just do not understand why they make so many assumptions when that is not how the world actually functions. I do not get why in order to make some people better off there has to be some that are made worse off. To some this makes sense to me, it does not. Like I said earlier I am not a philosopher nor an economist, though this whole idea of using Pareto optimality and defining economic efficiency as preference satisfaction is not a good way to do so. Sometimes people prefer certain things because their beliefs are jumbled up, so even if there was a large net efficiency it does not mean that is the best for