The First Theorem of Welfare Economics Implies That

question 50

Multiple Choice

The first theorem of welfare economics implies that:

• A)a competitive equilibrium exists in most cases.
• B)the competitive equilibrium is Pareto- optimal when it exists.
• C)there are positive transaction costs.
• D)all gains from trade are realized.

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Definitions:

Hourly Wage

The amount of money paid to an employee for every hour worked.

Fringe Benefits

Nonwage compensation, mainly medical insurance, that workers receive from employers.

Demand for Labor

The total amount of labor that employers are willing and able to hire at a given wage rate in a certain period.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource or factor of production.