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1.
(a) What is asserted by the First Theorem of Welfare Economics?
(b) What is meant in general by the term "market failure"? (c) What is the definition of a real (non-pecuniary) externality?
(d) What is the definition of a pecuniary externality?
(e) Does the existence of a real externality contradict the First Theorem of Welfare Economics?
(f) Does the existence of a pecuniary externality contradict the First Theorem of Welfare Economics?
(g) Is it always socially optimal to have a zero level of an activity that generates a harmful externality?
(h) If the answer to (g) is "no," just when is it socially optimal to have a zero level of an activity that generates a harmful externality?
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