With Quasilinear Preferences, the Equivalent Variation and the Compensating Variation

question 12

True/False

With quasilinear preferences, the equivalent variation and the compensating variation in income due to a tax are the same.

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Definitions:

Market Price

The ongoing price level for buying or selling an asset or service in the open market.

Market Output

The total quantity of goods and services produced and offered for sale in a market.

External Benefits

Positive effects experienced by third parties as a result of an economic transaction not directly involved.

Efficient Outcome

A situation in which no individual can be made better off without making someone else worse off, typically referring to an optimal allocation of resources.