Use the following statements to answer this question:
I. The first theorem of welfare economics refers to efficient allocation of goods across groups of consumers, and it does not consider the problem of efficient production of these goods.
II. The only way to achieve an efficient allocation of goods is to use competitive markets.
A) I and II are true.
B) I is true and II is false
C) II is true and I is false.
D) I and II are true

Question

Quizplus · Accepted Answer

Statement I is true, as the first theorem of welfare economics only focuses on the efficient allocation of goods across groups of consumers, without considering the production process. However, statement II is false, as there are other mechanisms besides competitive markets that can lead to efficient allocation of goods. For example, government intervention, such as price controls or subsidies, can correct market failures and achieve efficient outcomes. Therefore, I is true and II is false.

Use the Following Statements to Answer This Question