1. (a) There are a number of policy initiatives intended to replace government welfare programs (financed through taxes) by privately charity (organized by churches and other local community centers). Can fair income distribution be considered a public good? Do you think that there would be enough of this good if income redistribution is left to people themselves?

True, false, uncertain; explain. State whether each of the following statements is true,

false or uncertain (by which we mean the answer is ambiguous, under some

circumstances it may be true and under others it may be false), and explain your answer.

If a word or phrase is underlined, you must provide its definition in your answer.

2. The Second Fundamental Theorem of Welfare Economics states that when (1) all producers & consumers act as perfect competitors and (2) a market exists for every

commodity then a Pareto efficient allocation of goods will emerge from competitive

market.

3. At the efficient level of consumption of a pure public good, the MRS between the good and the relevant alternative is the same for everyone consuming the good.