Suppose the conditions of the first welfare theorem hold. If the government redistributes income prior to production and trade occurring, the market outcome (resulting from production and trade) will be efficient so long as no deadweight loss is produced in the levying of redistributive taxation.

Answer the following statement true (T) or false (F)

True

Rationale: The first welfare theorem holds for any initial distribution of income -- so if the government achieves a new distribution of income before letting markets work, and if it does so without generating a deadweight loss, then the equilibrium is efficient.