What is meant by Pareto efficient allocation of resources? Is Perfect competition market equilibrium Pareto efficient? Discuss using appropriate diagrams.

Pareto efficiency refers to a situation in which resources are allocated in such a way that no individual can be made better off without making someone else worse off. In other words, an allocation is Pareto efficient if there is no other allocation of resources that would improve the situation of one person without harming another. This concept is named after the Italian economist Vilfredo Pareto, who first introduced the idea in the early 20th century. Pareto efficiency is often used in welfare economics to analyze the efficiency of market outcomes and distribution of goods and services.

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