ECO209Y5 Chapter 5: chapter 5
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5: optimal model as if an invisible hand were guiding the actions of individuals toward a state of affairs beneficial for all. The model we have constructed here have the same property that a competitive equilibrium. Is the same outcome that would be chosen by the invisible hand of the fictitious social panners. the first welfare theorem is very remarkable. Because some people value moral more important although the goal for the firm is to maximize the profit. As po might have the property of some ppl very poor and some very rich. Po is a very narrow concept of social optimality. 7: distorting taxes ce might not be po because consumer set wage w(1-t). then when the consumer optimize, he or she will set mrs= w (1-t), while the firm optimizes by setting. Mpn= w. third reason market do not achieve efficenty is that firm may not be price- takers.
