Question

The Big Tradeoff highlights the tension between equally distributing the economic pie (equality or equity) and generating the greatest possible economic pie (efficiency). How does the game played by Mellors and Nero described in this chapter illustrate Okun's trade-off

Answer 1

D. The game illustrates that when you separate effort from​ reward, to achieve​ equity, the result is less effort and a smaller pie.

Explanation:

Okuns equality and efficiency explores the trade-off between inequality and economic efficiency. According to him there is a conflict that the government faces when they try to achieve equality by giving up higher reward for more effort, in other words rewarding every individual equally whether they work less or more in order to achieve equality. This causes economic inefficiency as people are not encouraged to work and there is less output consequently. The game played by Mellor and Necro mirrors same situation whereby government gives equal pay to two individuals who are working dIfferently, one working hard and the other not as much. This therefore leads to lower output