Consider an economy with two people, Victoria and Albert, and two commodities, tea and crumpets. Currently, Victoria and Albert would both be willing to substitute two cups of tea for one crumpet. Further, if the economy were to pro-duce one less cup of tea, the resources released from tea production could be used to produce three more crumpets. Is the allocation of re-sources in this economy Pareto efficient? If not, should there be more tea or more crumpets?
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