Allocation of resources is inefficient only if:

• A. income is distributed equally among all individuals
• B. all resources are fully employed
• C. it is possible to make someone better off without making someone else worse off
• D. goods are produced at the lowest possible cost

Answer: (C)

Verified step by step guidance

1. Understand the concept of efficiency in resource allocation, which in microeconomics typically refers to Pareto efficiency. This means that resources are allocated in such a way that no one can be made better off without making someone else worse off.
2. Review the given options and identify which condition aligns with the definition of inefficiency. For example, if it is possible to improve someone's situation without harming another, the allocation is not efficient.
3. Recognize that equal income distribution or full employment of resources does not necessarily guarantee efficiency. Efficiency is about optimal allocation, not equality or full utilization alone.
4. Recall that producing goods at the lowest possible cost relates to productive efficiency, which is a component of overall efficiency but does not alone define whether allocation is efficient or inefficient.
5. Conclude that the key indicator of inefficiency is the possibility of making someone better off without making someone else worse off, which violates the condition for Pareto efficiency.