True/False For each of the following, you MUST indicate whether the statement is TRUE or FALSE and you MUST explain why. 1. 2. 3. 4. 5. A Nash Equilibrium is always Pareto Efficient. When there is production, a Competitive Equilibrium is not always Pareto Efficient due to possible increasing returns to scale. A Prisoner's Dilemma must involve prisoners. This is what makes the model interesting. A Pigouvian Tax to correct for the inefficiencies caused by a negative externality should be corrected by placing the tax between the Private Demand and the Social Demand at the intersection of Supply and Private Demand. To find the Social Welfare Function, simply add up the individual utility functions of each member of society.

Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: Oligopoly
Section: Chapter Questions
Problem 5CQQ
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True/False
For each of the following, you MUST indicate whether the
statement is TRUE or FALSE and you MUST explain why.
1.
2.
3.
4.
5.
A Nash Equilibrium is always Pareto Efficient.
When there is production, a Competitive Equilibrium is not always Pareto Efficient due
to possible increasing returns to scale.
A Prisoner's Dilemma must involve prisoners. This is what makes the model interesting.
A Pigouvian Tax to correct for the inefficiencies caused by a negative externality should
be corrected by placing the tax between the Private Demand and the Social Demand at
the intersection of Supply and Private Demand.
To find the Social Welfare Function, simply add up the individual utility functions of
each member of society.
Transcribed Image Text:True/False For each of the following, you MUST indicate whether the statement is TRUE or FALSE and you MUST explain why. 1. 2. 3. 4. 5. A Nash Equilibrium is always Pareto Efficient. When there is production, a Competitive Equilibrium is not always Pareto Efficient due to possible increasing returns to scale. A Prisoner's Dilemma must involve prisoners. This is what makes the model interesting. A Pigouvian Tax to correct for the inefficiencies caused by a negative externality should be corrected by placing the tax between the Private Demand and the Social Demand at the intersection of Supply and Private Demand. To find the Social Welfare Function, simply add up the individual utility functions of each member of society.
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