The First Fundamental Theorem of Welfare Economics requires
A)producers and consumers to be price takers.
B)that there be a market for every commodity.
C)that the economy operate at some point on the utility possibility curve.
D)all of the above.

Question

Quizplus · Accepted Answer

The First Fundamental Theorem of Welfare Economics requires all of the above conditions to hold true.

A) Producers and consumers being price takers ensures that the market outcomes reflect the preferences and resources of all the individuals involved.

B) The requirement of a market for every commodity ensures that there is no market failure arising from the existence of externalities.

C) The economy operating at some point on the utility possibility curve ensures that resources are allocated efficiently, providing maximum satisfaction to individuals given available resources.

The First Fundamental Theorem of Welfare Economics Requires