1. If a policy change causes a Pareto improvement, is the outcome necessarily Pareto efficient? If a situation is Pareto efficient, are Pareto improvements possible? If a change occurs that causes a Pareto efficient outcome, is the change necessarily a Pareto improvement? Please explain.
2. The price of wholesale milk dropped by 30.3%, when the Pennsylvania Milk Marketing Board lowered the regulated price. The price to consumers fell by less than 30% in Philadelphia. Why?
3. A maker of specialty soaps supplies a unique soap made from cactus extract to the only two retailers in a small town. The producer sells the soap to the retailers at the marginal cost of production of the soap, $1.00 per bar, and receives 20% of the profit earned when the retailers sell the soap to customers. Would the producer prefer that the retailers compete with each other on price or to specify the retail selling price of the soap to both retailers?