The idea that every Pareto efficient allocation is the competitive equilibrium for some initial allocation of resources is known as:
A) the first welfare theorem.
B) the second welfare theorem.
C) the third welfare theorem.
D) the exchange efficiency condition.

Question

Quizplus · Accepted Answer

The second welfare theorem states that under certain conditions, every Pareto efficient allocation can be achieved as a competitive equilibrium given some initial distribution of wealth or resources. This contrasts with the first welfare theorem, which says that under certain conditions, a competitive equilibrium is Pareto efficient.

The Idea That Every Pareto Efficient Allocation Is the Competitive