The second fundamental theorem of welfare economics states that

Question

Quizplus · Accepted Answer

The second fundamental theorem of welfare economics states that under certain conditions, a Pareto optimum is a competitive equilibrium. This means that if the conditions are met, then it is possible to achieve a Pareto optimum through a free market without the need for government intervention. However, it does not mean that every Pareto optimum is a competitive equilibrium, so option D is incorrect. Option A is partially correct in that a competitive equilibrium can be Pareto-optimal under certain conditions, but it is not always the case. Option B is incorrect because not every competitive equilibrium is Pareto-optimal. Option E is incorrect because a Pareto optimum can be a competitive equilibrium under certain conditions.

The Second Fundamental Theorem of Welfare Economics States That