A Lesson to Policy Makers from the Theory of Second

question 1

Multiple Choice

A lesson to policy makers from the Theory of Second Best is that:

• A)Care is needed removing any one distortion in the economy, given the possible interaction between various distortions in the economy.
• B)Total surplus will increase if all distortions can be simultaneously eliminated.
• C)The largest market failures need to removed first.
• D)a and B

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Definitions:

Industry Y

This term is not specific; however, it typically refers to a hypothetical or specific sector within the economy during discussions or analyses.

Concentration Ratio

A metric used to assess the degree of market concentration by measuring the market share of the largest firms within an industry.

Market Share

The segment of the market that is dominated by a specific company or product.

Concentration Ratio

A measurement used in economics to assess the extent of market share controlled by the top firms within an industry.