List and explain 4 reasons why the first welfare theorem might not hold in practice

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List and explain 4 reasons why the first welfare theorem might not hold in practice

business economics

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Answer 1

Answer #1

The four reasons are as follows-

1) It states that there are no transaction costs are involved which is not true in todayss time and also the the market is said to have perfect information.

2) It assumed that there exists no monopolists which is untrue for almost every market today.

3) It also assumes that there exists perfect substitute for each and every good.

4) The last thing is no government intervention also known as laissez faire.

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Answer 2

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List and explain 4 reasons why the first welfare theorem might not hold in practice

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List and explain 4 reasons why the first welfare theorem might not hold in practice

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