The Main Point of the Second Theorem of Welfare Economics

question 89

Multiple Choice

The main point of the second theorem of welfare economics is that:

• A) efficiency is more important than equity.
• B) efficiency may be achieved, but equity is not a feasible goal.
• C) any attempt to achieve an equitable outcome must occur off the contract curve.
• D) any equitable outcome can be achieved by reallocating the resources among the members of a society.

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Definitions:

After-Tax Salvage

The net value of an asset after subtracting taxes associated with its sale or disposal.

Stand-Alone Principle

A method of evaluating the attractiveness of an investment project by analyzing its cash flows as if it were the only project undertaken by the firm.

Bell's Theorem

A fundamental theorem in quantum mechanics that shows how some quantum predictions can be strongly at odds with local realism.

Equivalent Annual Cost

The cost per year of owning and operating an asset over its entire lifespan.