The Second Fundamental Theorem of Welfare Economics States That

question 68

Multiple Choice

The second fundamental theorem of welfare economics states that

• A) under certain conditions, a competitive equilibrium is Pareto optimal.
• B) a competitive equilibrium is always Pareto optimal.
• C) under certain conditions, a Pareto optimum is a competitive equilibrium.
• D) a Pareto optimum is always a competitive equilibrium.

Understand the application and limitations of the high-low method in cost estimation.

Learn about the significance of the least-squares regression method and its statistical reliability in cost estimation.

Know the structure of the contribution margin income statement and its use in classifying costs by behavior.

Understand the principles of activity-based costing (ABC) and its application in internal decision-making.

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Definitions:

Game Theory

A mathematical and analytical framework used to study strategic interactions among rational decision-makers, aiming to predict outcomes in competitive situations.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies while the other players keep theirs unchanged.

Dominant Strategy

A strategy in game theory that yields the best outcome for a player, no matter what the opponents choose to do.

Credibility

The quality of being trusted and believed in, often a crucial factor for individuals, organizations, and information sources.