Which term describes the idea that not all individuals prefer an equal ratio of outputs to incomes?

• A. Absolute advantage
• B. Heterogeneous preferences
• C. Law of diminishing returns
• D. Pareto efficiency

Answer: (B)

Verified step by step guidance

1. Understand that the question is asking about a concept related to individuals' differing preferences regarding the ratio of outputs to incomes.
2. Recall the definitions of the given terms: Absolute advantage refers to the ability of an individual or group to produce more of a good with the same resources; Law of diminishing returns describes how adding more of one input eventually yields smaller increases in output; Pareto efficiency is a state where no one can be made better off without making someone else worse off.
3. Identify that the term 'Heterogeneous preferences' means that individuals have different tastes or preferences, implying they do not all prefer the same ratio of outputs to incomes.
4. Match the concept of differing preferences to the term 'Heterogeneous preferences' as it directly addresses variation in individual choices or desires.
5. Conclude that the correct term describing the idea that not all individuals prefer an equal ratio of outputs to incomes is 'Heterogeneous preferences'.