Y7

IV. Second Welfare Theorem: This theorem requires convexity of both preferences and technology. A. Why is convexity needed? B. Draw a graph for the Robinson Crusoe economy where (1) preferences are not convex and (2) the Pareto efficient allocation cannot be supported as a competitive equilibrium. C. Draw a graph for the Robinson Crusoe economy where (1) technology is not con- vex and (2) the Pareto efficient allocation cannot be supported as a competitive equilibrium