First Welfare Theorem says that the competitive equilibrium allocation is Pareto Efficient under a very minimal set of assumptions. In view of this, provide at least two arguments for why there may (or may not) be a role for government.
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- The first fundamental theorem of welfare economics states: A) Competitive markets lead to a Pareto efficient allocation. Pareto improvements lead to increased competition. No one can be made better off without someone is being made worse off. D) Competitive markets lead to externalities and information problemsTrue or False. State with reasoning: The theory of second best says that if there is a distortion that cannot be removed from the market, then it is never best to get all other variables to the Pareto efficient allocation.This question is asking you to analyze the welfare effects of a tax on producers. Assume that theoriginal equilibrium was the perfectly competitive equilibrium and that the tax was imposed on producersafterward.a) Use a graph to illustrate the equilibrium price, equilibrium quantity, consumer surplus and producersurplus for the perfectly competitive market for commodity x (without the tax on producers). Using another graph, transcribe the relevant parts
- a pareto efficient allocation should always be on the contract curve . Discuss this sentencea) State and explain Arrow’s Impossibility Theorem and its implications for social choice. b) State and explain the First and Second Welfare Theorem and discuss their economic implication and significance. c) Explain the concept of minimum efficient scale and its relevance for determining when a market is likely to become a monopoly or a competitive market.Is point E Pareto efficient allocation? Explain your answer.
- The first Welfare Theorem states that, invariably, a competitive market results in an efficient allocation of resources and thus maximizes social surplus. True or False?The graph on the right shows the willingness to pay of two consumers, Annie and Ben. We can determine from the graph that when the market price PM = $27, Annie's consumer surplus is and Ben's is Assuming the shaded region consists of the total market consumer surplus, then its value is $ (Enter your response as a whole number.) Consumer surplus is based on which of the following economic theories? OA. Marginal analysis OB. Marginal costs only OC. Total benefits OD. Marginal benefits only Financial incentives can help make people behave in a desired way when the incentives are O A. combined with moral suasion. OB. enough to satisfy other needs. OC. substantial. OD. provided consistently. Price ($) 100 80- 60- A 40- PM-27 20 0- 0 B D E C. Ben 40 50 Quantity sold Annie 10 20 30 60 70 80 Oo SThe figure on the right displays the market for video game consoles, where nine buyers are interacting with nine sellers. According to this figure, the equilibrium price is $, and at that price, the equilibrium quantity is When the market is in equilibrium, social surplus is $. If the number of consoles is restricted to two less than the equilibrium quantity, social surplus is $. Alternatively, if the government mandated that one more video game console than equilibrium be transacted, social surplus is now $. From this analysis, it can be concluded that a market in competitive equilibrium social surplus. ៖ 900+ 800- 700- 600- 500- 400- 300- 200- 100- 0 Market for Video Game Consoles Quantity 6 7
- which statements are true Suppose favorable weather provides increases apple production. As a result, consumer surplus in the market for orange juice decreases because the supply curve of apple juice shifted to the The particular price that results in quantity supplied being equal to quantity demanded is the best price for consumers because it maximizes consumer surplus. The willingness to pay is the maximum amount that a buyer will pay for a good. Dora visits a clothing store to buy new dress suit. She is willing to pay $100 for the suit, but buys one on sale for $75. Dora's consumer surplus from the purchase is $75. If production technology improves in the shoe industry, consumer surplus for shoe buyers will increase because the rightward shift of supply caused the price to fall. Suppose that the equilibrium price in the market for heating oil is $3.50 per gallon. If a law imposed a price ceiling on the market and reduced the maximum legal price for heating oil to $3.00 per gallon…A two-good economy is in a competitive equilibrium. The price of a piece of candy is $2 andthe price of a desk is $12. The marginal cost of candy is given by MCc = 2Qc and the marginalcost of a desk is MCd = 4 + 4Qd. The current production level of candy is one piece. What is theoutput of desks? A) Qd = 1B) Qd = 2C) Qd = 4D) Qd = 5Two of the most fundamental findings in welfare economics describe the relationship between markets and Pareto-efficiency. What are these findings? What are the conditions of Pareto-efficiency that competitive economies satisfy? What is the significance of these results for the discipline of Public Economics?
