Suppose the conditions of the first welfare theorem hold. If the government redistributes income prior to production and trade occurring, the market outcome (resulting from production and trade) will be efficient so long as no deadweight loss is produced in the levying of redistributive taxation.
Answer the following statement true (T) or false (F)
True
Rationale: The first welfare theorem holds for any initial distribution of income -- so if the government achieves a new distribution of income before letting markets work, and if it does so without generating a deadweight loss, then the equilibrium is efficient.
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During 2008 and 2009, the debt to GDP ratio in the United States
A) remained relatively unchanged, as it has since the mid 1970s. B) fell to its lowest level since World War I. C) is the highest it has been since the founding of the country. D) rose to its highest level since World War II.
Required reserves are
A) the portion of demand deposits and NOW accounts banks must hold. B) zero on demand deposits. C) zero on NOW accounts. D) imposed on all deposits at commercial banks.
Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Suppose the government imposes a $2.00 per gallon tax on milk. The formula for the market-clearing curve for milk after the tax is:
A. Pm = 4 - (Pc/6). B. Pm = 5 - (Pc/6). C. Pm = 5 + (Pc/6). D. Pm = 2 - (Pc/6).
If tablets have an absolute price elasticity of 1, the demand for tablets is
A) unit elastic. B) inelastic. C) perfectly elastic. D) elastic.