“The First Welfare Theorem holds only if all consumers and firms are price takers. If some individuals or firms are price makers (they have the power to affect prices), then the allocation of resources will generally be inefficient.”

Source: Public Finance - International Edition - Sixth Edition, Chapter 3, Tools of Normative Analysis, p. 44

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Harvey S. Rosen21

American economist 1949

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Letter 3
Letters

“The First Welfare Theorem holds only if all consumers and firms are price takers. If some individuals or firms are price makers (they have the power to affect prices), then the allocation of resources will generally be inefficient.”

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Harvey S. Rosen21

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