Which statement describes the equity‑efficiency trade‑off? Government intervention can increase efficiency in a market. Actions intended to make economic outcomes fairer may cause efficiency to decrease. There is always a more equitable outcome that is also more efficient. The least efficient economic outcome is the fairest outcome.

Question

Carina Cameron

Business

2 December, 22:35

Which statement describes the equity‑efficiency trade‑off? Government intervention can increase efficiency in a market. Actions intended to make economic outcomes fairer may cause efficiency to decrease. There is always a more equitable outcome that is also more efficient. The least efficient economic outcome is the fairest outcome.

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Answers (1)

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Kieran Larson · Answer 1

The correct answer is "Actions intended to make economic outcomes fairer may cause efficiency to decrease"

Explanation:

"Actions intended to make economic outcomes fairer may cause efficiency to decrease"

An equity-efficiency trade-off appears when an increase in the productive efficiency of a market leads to a reduction in its equity.

A clear example of equity-efficiency trade-off is the "fracking" (fuel extract method). The government takes benefits of this because is a more efficient method and is cheaper than the conventional extract method, however, it brings environmental issues, and leads to a reduction in its environmental equity.