Question

Question 1 10 points Save Analytical Reasoning 1 Make your judgment, and explain why the statement is true false or uncertain. You're going to lose most points if there is no explanation. (Hint: please concentrate on the basic concepts to presenting your arguments, you are evaluated based on the substance of your concepts but not how long you can write) 1. (10pts) A socially desirable Pareto Efficiency allocation cannot be attained in a competitive market.

Answer 1

I consider the statement to be TRUE. Below are few reasons:

Firstly, Pareto Efficiency works in the environment of economic restrictions named as model assumptions. Some ot them are no externalities, no transaction costs and full information.

Secondly, Pareto Efficiency does not guarantee equity. Equity is important from the standpoint of socially desirable allocations. There exists a trade-off between efficiency and equity.

Thirdly, Pareto Efficiency does not talk about the distribution of income. Without income distribution, it is impossible to attain a socially desirable Pareto efficient allocation in a competitive setup.