implicitly used the In the Robinson Crusoe model assumption of convex technology (concavity of the production...

 

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implicitly used the In the Robinson Crusoe model assumption of convex technology (concavity of the production function F()), describing the production possibility set as convex. Consider now a Robinson Crusoe economy with a nonconvex production possibility set. (a) Diagram the possibility that there is a competitive equilibrium (despite the nonconvexity). (b) Is the equilibrium established in (a) Pareto efficient? Explain. (c) Diagram the possibility that there is no competitive equilibrium (due to the nonconvexity). Explain. (d) In the nonconvex Robinson Crusoe economy, can a Pareto-efficient allo- cation generally be sustained as a competitive equilibrium? Diagram and explain. implicitly used the In the Robinson Crusoe model assumption of convex technology (concavity of the production function F()), describing the production possibility set as convex. Consider now a Robinson Crusoe economy with a nonconvex production possibility set. (a) Diagram the possibility that there is a competitive equilibrium (despite the nonconvexity). (b) Is the equilibrium established in (a) Pareto efficient? Explain. (c) Diagram the possibility that there is no competitive equilibrium (due to the nonconvexity). Explain. (d) In the nonconvex Robinson Crusoe economy, can a Pareto-efficient allo- cation generally be sustained as a competitive equilibrium? Diagram and explain.