1 The second welfare theorem Consider a 2-agent, 2-good economy where each agent has Cobb-Douglas preferences u' (x]) = jac2. Initial endowments are el = (2, 1) and e2 = (2, 7). 1. Show that the allocation al = (2, 4), x2 - (2, 4) is Pareto-efficient. 2. Find a competitive equilibrium of this economy