Solved previous year question from the OPSC OAS/OCS 2024 Preliminary Examination (General Studies), with the official answer key and a detailed explanation.
Question
Which of the following best defines the concept of Pareto Optimality?
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Answer & Explanation
Correct answer: (B) A situation where no one can be made better off without making someone else worse off
A situation where no one can be made better off without making someone else worse off
Pareto Optimality — Overview
Named after Italian economist Vilfredo Pareto, Pareto Optimality (also called Pareto Efficiency) describes an allocation of resources where it is impossible to improve one person’s condition without worsening another’s. It is a foundational concept in welfare economics and game theory, representing a state of maximum allocative efficiency within given resource constraints.
Key Distinction
Pareto Optimality does not imply equality, fairness, or maximum social welfare. A situation where one person holds all resources and others have nothing can still be Pareto Optimal — because improving others’ condition would require taking from that one person. This reveals its central limitation as a welfare criterion.
Pareto Improvement
A Pareto Improvement occurs when at least one person is made better off without making anyone else worse off. Once no further Pareto improvements are possible, the allocation is Pareto Optimal.
