Question 21 Statement 1: A Pareto improvement cannot take place unless compensation is made to both parties Statement 2: If Pareto improvement is not possible, then we have a situation known as Pareto Optimality A) Statement 1 is True; Statement 2 is False B) Statement 1 is False; Statement 2 is True C) Both statements are True D) Both statements are False Question 22 Statement 1: Supposing that production of a good creates a negative externality, then an excise tax equivalent to the difference between the marginal social cost and the marginal private cost of production can correct the inefficiency. Statement 2: Positive externalities create excess demand A) Statement 1 is True; Statement 2 is False B) Statement 1 is False; Statement 2 is True C) Both statements are True D) Both statements are False