Question

If in Equitania, 20% of the population receive 80% of the income and the remaining 80% of the population receive 20% of the income, Equitania's economy:

	may be efficient.
	cannot be efficient, since efficiency requires a more nearly equal distribution of income.
	is neither efficient nor equitable.
	is efficient.

Answer 1

Economic efficiency means a situation in which every resource is optimally allocated to serve each individual or entity in the best possible way and at the same time minimizing waste and inefficiency.

Hence it can be said that an economy is efficient when all opportunities to make some people better off without making other people worse off have been taken.

Efficiency does not require equal distribution of income. It may or may not be.

Since in Equitania, 20% of the population receive 80% of the income and the remaining 80% of the population receive 20% of the income, it means the Aquitania's economy is not equitable.

Hence it can be said that Aquitania's economy can be or cannot be efficient because for determining efficient criteria, the sufficient information is not given.

Hence it can be said that Aquitania's economy may be efficient.

hence option first is the correct answer.