Question

According to the first theorem of welfare economics: every competitive equilibrium is fair. if the economy...

  1. According to the first theorem of welfare economics:

    1. every competitive equilibrium is fair.

    2. if the economy is in a competitive equilibrium, there is no way to make anyone better off.

    3. a competitive equilibrium always exists.

    4. at a Pareto optimum, all consumers must be equally wealthy.

    5. Noneoftheabove.

Homework Answers

Answer #1

First theorem of welfare economics states is based on two assumptions

1) All commodities are competitive and

2)There exists markets for all commodities.

These assumptions lead to the fact that when market and equilibrium exists for all commodities and there is no government intervention. The theorem states that any competitive equilibrium (also known as the walrsasian ) would lead to pareto efficient allocation of resources. ANd the definition of pareto efficient allocatioj is that there is no way to make someone better off without making someone else worse off.

So answer is option if the economy is in a competitive equilibrium, there is no way to make anyone better off.

(You can comment for doubts )

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Explain the difference between the first and second welfare theorems. A. The first welfare theorem discusses...
Explain the difference between the first and second welfare theorems. A. The first welfare theorem discusses a competitive equilibrium with the help of the​ government; the second welfare theorem discusses a competitive equilibrium without the help of the government. B. The first welfare theorem states that a competitive equilibrium is​ Pareto-optimal under certain​ conditions; the second welfare theorem states that a Pareto optimum is a competitive equilibrium under certain conditions. Your answer is correct. C. The first welfare theorem discusses...
Why is the First Welfare Theorem such a big deal in a market that is perfectly...
Why is the First Welfare Theorem such a big deal in a market that is perfectly competitive and has no externalities? Because it tells us that the free market gives the greatest amount of surplus possible only for consumers. Because it tells us that the free market is efficient even when the government enters and imposes a tax or a subsidy. Because it tells us that market equilibrium allocations are Pareto efficient. Because it tells us that the free market...
Consider a pure exchange economy with two consumers, Ann (A) and Bob (B), and two commodities,...
Consider a pure exchange economy with two consumers, Ann (A) and Bob (B), and two commodities, 1 and 2, denoted by (x^A_1, x^A_2) and (x^B_1, x^B_2). Ann’s initial endowment consists of 20 units of good 1 and 5 units of good 2. Bob’s initial endowment consists of 0 unit of good 1 and 5 units of good 2. The consumers’ preferences are represented by the following Cobb-Douglas utility functions:U^A(x^A_1, x^A_2) = (x^A_1)^2(x^A_2)^2 and U^B=√x&B1√x^B2. Denote by p1 and p2 the...
What are the four conditions that a competitive equilibrium must satisfy for a closed-economy model? ​(Select...
What are the four conditions that a competitive equilibrium must satisfy for a closed-economy model? ​(Select all that​ apply.) A. The representative firm chooses labour demand to maximize profits. B. The representative consumer partakes in equal trade tactics. C. The representative consumer chooses consumption and labour supply to make themselves as well off as possible. D. The market for labour clears. E. The government budget constraint is satisfied. F. The relationship between consumption and leisure is maximized. G. The representative...
[1] The basic problem that gives rise to the study of economics is the need to:...
[1] The basic problem that gives rise to the study of economics is the need to: A) control the effects of actions by foreign governments. B) be sure all the goods and services produced in an economy get sold. C) use scarce resources to satisfy people's unlimited material wants and needs. D) control people's tastes and wishes so that the available resources can produce all the goods and services they want. [2] Economics is concerned with: A) earning as much...
The welfare loss from monopoly can be seen from the difference in equilibrium between a. marginal...
The welfare loss from monopoly can be seen from the difference in equilibrium between a. marginal revenue and marginal benefit. b. marginal cost and marginal benefit. c. supply and demand. Which of the following is not a reasonable argument for government involvement in education? a. Education has some public good aspects, especially in a democracy. b. Education is a merit good. c. Education is more efficiently produced by government. d. Public provision of education has desirable distributional consequences. A mixed...
Read and comment: $2500: “A Fair Price for Hamilton” NY Times, 23 October 2016 Gregory Mankiw...
Read and comment: $2500: “A Fair Price for Hamilton” NY Times, 23 October 2016 Gregory Mankiw Consumers of goods and services do not typically wish that producers charged higher prices. But that was exactly my desire on a recent trip to New York City. The story begins with a basic mismatch: I am a big fan of theater, and I live just outside Boston. While Boston is a good city for the arts, it is not the mecca that New...
_____ 1. According to the benefit principle of taxation: a. taxes should be distributed according to...
_____ 1. According to the benefit principle of taxation: a. taxes should be distributed according to peoples’ ability to pay. b. the progressive income tax represents the ideal way of distributing taxes among a nation’s citizens. c. user charges are an ideal source of finance for government-produced goods and services. d. flat-rate taxes are the only fair type, since all citizens benefit equally from provision of public goods. _____ 2. If horizontal equity is achieved in taxation: a. individuals of...
1. Which is the most accurate definition of the study of economics? [1] Distributing surplus goods...
1. Which is the most accurate definition of the study of economics? [1] Distributing surplus goods to those in need. [2] Dealing with affluence in a morally bankrupt world. [3] Using scarce resources to satisfy unlimited human wants. [4] Reducing human wants to eliminate the problem of scarcity. 2. Computer software represents [1] labour. [2] land. [3] capital. [4] entrepreneurship. 3. Suppose you have graduated with a degree in accounting and are offered a job with an accounting firm. But...
ECO 101-S70: Final Quiz 2 CHAPTER 3: Demand, Supply and Equilibrium 1. Which of the following...
ECO 101-S70: Final Quiz 2 CHAPTER 3: Demand, Supply and Equilibrium 1. Which of the following could cause a decrease in consumer demand for product X? a.   a decrease in consumer income b.   an increase in the prices of goods which are good substitutes for product X c. an increase in the price which consumers expect will prevail for product X in the future d. a decrease in the supply of product X 2. If two goods are substitutes for...