Lecture 4-1: ""

Question 1

The “surplus” gained by producers or consumers over their reservation price

Answer 1

Social surplus

Question 2

It is feasible and there is no better allocation to make someone better off without being detrimental to another person

Answer 2

Pareto efficiency

Question 3

This entity knows everyone’s reservation prices, seller costs. You pick whom produces and consumes.

Answer 3

Social Planner

Question 4

The amount at which the (reservation price) = (Seller costs)

Answer 4

Efficient Quantity

Question 5

The market is guided by an invisible hand
With this, you make two assumptions:
1. Perfect Competitiveness
2. No externalities

Answer 5

First Welfare Theorem