The first theorem of welfare economics states that
A)government action is never Pareto efficient.
B)Pareto efficiency is achieved in competitive markets.
C)Pareto efficiency can be achieved only in competitive markets.
D)Pareto efficiency is unattainable.
E)government intervention is needed to achieve Pareto efficiency.

Question

Quizplus · Accepted Answer

The first theorem of welfare economics states that in a perfectly competitive market, when resources are allocated via voluntary exchange, the resulting outcome is Pareto efficient. This means that no one can be made better off without making someone else worse off. Therefore, choice B is the best answer.

The First Theorem of Welfare Economics States That