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1. What is Pareto efficiency, or Pareto optimality? Explain. 2. What is an “increasing costs industry”?...

1. What is Pareto efficiency, or Pareto optimality? Explain.

2. What is an “increasing costs industry”? How are a firm's costs affected as an industry expands? ...as this industry contracts?

3. What is a “constant costs industry”? How are a firm's costs affected as this industry expands or contracts?

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Answer #1

1. In simple words, Pareto efficiency or Pareto optimality is a state of allocation from which it is impossible to reallocate resources to make any person better off without making someone else worse off. This concept was given by Italian economist Vilfredo Pareto. Pareto efficiency or Pareto optimality is a situation in which resources are allocated in the most efficient way; therefore, under Pareto efficiency or Pareto optimality, individuals in an economic system are maximizing their utility given the resource level.

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