All societies face a trade-off between equality and efficiency.

If the United States government raises the income taxes on the wealthiest Americans, while increasing welfare payments to the poorest Americans, the result will likely be (increase/decrease) in efficiency and (increase/decrease) in equality in the United States.

Please determine if it is increase or decrease.

PART B:

Paolo is training for a triathlon, a timed race that combines swimming, biking, and running.

Consider the following sentence: Because his pool sessions are helping him swim more quickly, Paolo plans to reduce by 1 hour per week the time he spends training on the bike and increase by 1 hour the time he spends in the swimming pool; however, his wife says that he should stop doing any biking and running and spend all 20 hours per week in the pool.

Which basic principle of individual choice does Paolo's plan illustrate that his wife's advice does not?

A) Resources are scarce.

B) All costs are opportunity costs.

C) Many decisions are made on the margin.

D) People usually exploit opportunities to make themselves better off.