Question

Explain each of the three conditions for pareto optimality satisfied by a perfectly competitive economy

Answer 1

Explanation:

First, in a perfectly competitive economy, the MRT for any two goods will equal the price ratio of these two goods. ... Since the MRSs and MRTs are equal to the same price ratio, they are equal to each other. Therefore, the third marginal condition for Pareto optimality is satisfied by a perfectly competitive economy......