What Are the Three Conditions for a Pareto-Optimal Outcome in a Perfectly

question 40

Essay

What are the three conditions for a Pareto-optimal outcome in a perfectly competitive two-product economy? Which are is not satisfied when an externality is present?

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Definitions:

Common Stock

A type of security that represents ownership in a corporation, entitling the shareholder to a proportion of the corporation's assets and profits.

Depreciation

The systematic allocation of the cost of an asset over its useful life.

Net Income

The total revenue of a company minus its expenses, taxes, and the cost of goods sold, indicating the company's profit.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was put into use.