If people can borrow and lend to smooth their living standards perfectly over their lifetimes, which measure best reflects the distribution of living standards?

Correct answer D. Maximise the well-being of the worst-off person in society

Correct answer B. By redistributing income from rich to poor because, owing to diminishing marginal utility of income, taking a pound from the rich reduces their utility by less than the gain from giving that pound to the poor

Correct answer C. Such redistribution would remove the incentive to work hard, so society's total income would fall and the least well-off person would be worse off than under a system with some income inequality

Correct answer A. Benefits are reduced at such a high rate when recipients earn more income that there is little or no incentive to work once receiving benefits