True/False/Uncertain/Explain For each of the propositions given, state whether t

Question

True/False/Uncertain/Explain For each of the propositions given, state whether the proposition is true, false, or uncertain, and then support your answer with an explanation. Use 1-3 concise sentences with each one.

a. The first fundamental welfare theorem gives the conditions under which the private market can lead to a particular efficient outcome.

b. A Pareto efficient allocation is one that yields a fair outcome.

c. A social welfare function summarizes society’s preferences over citizens’ utility.

Explanation / Answer

(a)The first fundamental theorem supports a case for non-intervention by the authorities in ideal conditions: let the market mechanisms do the work and the outcome will always be Pareto efficient. Pareto efficiency indicates that no one can be made better off without someone being made worse off. There can be more than one possible Pareto efficient allocations of resources and it is not necessary that all of them are equally desirable by society.

b. A Pareto efficient allocation is one that yields a fair outcome. Pareto efficiency indicates that no one can be made better off without someone being made worse off. There can be more than one possible Pareto efficient allocations of resources and it is not necessary that all of them are equally desirable by society.

(c) The social welfare function is similar to the consumer theory of indifference-curve/budget constraint equilibrium for an individual, excluding that the social welfare function is a plotting of judgments of everyone in the society as to collective choices.

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