The first welfare theorem:
A. tells us that, in a general equilibrium with perfect competition, the allocation of resources is Pareto efficient.
B. clarifies how the "invisible hand" of the market guides people toward socially undesirable choices.
C. tells us that a general equilibrium with perfect competition is not Pareto efficient.
D. is also the only welfare theorem.
A. tells us that, in a general equilibrium with perfect competition, the allocation of resources is Pareto efficient.
You might also like to view...
There are 72,922 seats in Lambeau Field where the Green Bay Packers play football. The Packers have sold out their season tickets since 1960. There were about 70,000 people on the waiting list to buy season tickets in 2010
Packers tickets are a normal good. As a result of the economic recession in 2010 during which people's incomes decreased, the A) demand for Packers tickets decreased. B) demand curve for Packers tickets shifted rightward. C) quantity demanded of Packers tickets decreased. D) substitution effect changed the quantity demanded.
Which of the following is most likely to increase the incentive to invest, produce, and employ others?
a. an increase in government expenditures to provide subsidies for large banks that made bad investment decisions b. an increase in government expenditures that changes the composition of aggregate demand c. a reduction in tax rates d. an increase in payments to unemployed workers financed by borrowing
Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?
a. There is no such thing as a free lunch. b. People buy more when prices are low than when prices are high. c. No matter how much people earn, they tend to spend more than they earn. d. Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
Assume that each day a firm uses 13 employee-hours per day and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a ________ of ________.
A. loss; $200 B. loss; $170 C. profit; $170 D. profit; $370