# Two firm two consumer economy efficiency (two goods)

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## Two firm two consumer economy efficiency (two goods)

 For pareto efficiency (given everything is convex, returns to scale are <=1) 1. MRS of all consumers=Marginal rate of transformation (slope of production possibilites frontier)=p(x)/p(y) 2. MRTS (Rate of technical substitution) for all producers=wage rate/rental rate Is it necessary that all conditions in 1 and 2 are equal among themselves too? As in, is MRS=MRTS=...==...? Also, for 2nd welfare theorem to hold, do we require the PPF to be a convex set, or each individual production functions to be convex set?
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## Re: Two firm two consumer economy efficiency (two goods)

 Mrs= mrts And I'm not sure but I think individual production function should be convex as well
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## Re: Two firm two consumer economy efficiency (two goods)

 https://economics.stackexchange.com/questions/5385/does-a-general-equilibrium-here-require-pareto-optimality/15165#15165Take a look at this. The answer shows that MRS (=4 )may not equal MRTS for firms (=w/r). I'm confused. Could you resolve this for me?
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## Re: Two firm two consumer economy efficiency (two goods)

 In reply to this post by Daffodils Also sounds awkward because we are equating producer profit maximisation with consumer preferences