Answer to Question #86151 in Finance for MJ

Question

Provide a rationale(s) why it would not be feasible for a national economy to operate at a Pareto efficient point.

Answer 1

Pareto efficient point is achieved in market equilibrium condition which is in optimal solution condition. This condition is rarely found in national economy. In actual, it is impossible for the government to make benefits to one society of group without impacting other society of group. Example is dealing the government with welfare work of the society, subsidy, natural calamity etc. in this case government needs to allocate the fund and comes under welfare. This is comes under welfare of the society. The government do not get beneficial in term of economy but attain social benefits to the society but not get any financial benefits.

So in actual case in case of national economy, parito improvement efficiency works.