Question

Evaluate the following claim. You’re welcome to argue for your reasoning with one or more examples....

Evaluate the following claim. You’re welcome to argue for your reasoning with one or more examples. A. Firms that produce personal computers are likely price takers. B. A pareto optimal distribution means that all people are happy with the result of the distribution.

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Answer #1

A) The following claim is not true. The firms which produce personal computers are not price takers. If they are price takers than that will mean that they will accept the price prevailing in the market. But, for personal computers prices vary from company to company. With product innovation and technical improvements, the price of the personal computer of one company may be very low than the other.

B) The following claim is not true. Pareto optimal distribution is a distribution where it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off. It does not necessarily result in a socially desirable distribution of resources as one can attain a better position by making the other one worse off.

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