The first welfare theorem
A) Tells us that, in a general equilibrium with imperfect competition, the allocation of resources is Pareto efficient
B) Clarifies how the "invisible hand" of the market guides people toward privatly desirable choices
C) Tells us that a general equilibrium with perfect competition is not Pareto efficient
D) Tells us that, in a general equilibrium with perfect competition, the allocation of resources is Pareto efficient

Question

Quizplus · Accepted Answer

The first welfare theorem states that, in a general equilibrium with perfect competition, the allocation of resources is Pareto efficient. This means that no further changes can be made to improve one person's welfare without making someone else worse off.

The First Welfare Theorem