Question

Given below are two statements, one is labelled as Assertion (A) and the other is labelled as Reason (R):
Assertion (A) According to the first theorem of welfare economics, a competitive equilibrium is Pareto efficient.
Reason (R) : According to the Walras law, the value of aggregate excess demand is zero for all prices.
In the light of the above statements, choose the correct answer from the options given below:

• A. Both (A) and (R) are true and (R) is the correct explanation of (A)
• B. Both (A) and (R) are true but (R) is not the correct explanation of (A)
• C. (A) is true but (R) is false
• D. (A) is false but (R) is true

Answer 1

Answer: (B)

Both (A) and (R) are true but (R) is not the correct explanation of (A)

Answer 2

The correct answer is (B) : Both (A) and (R) are true but (R) is not the correct explanation of (A)