|Fundamental Theorems of Welfare Economics|
The two theorems that describe the efficiency properties of a competitive equilibrium. The First Fundamental Theorem of Welfare Economics states that (in the absence of any market failure) a competitive equilibrium is Pareto efficient. The Second Fundamental Theorem of Welfare Economics states that if every consumer has convex preferences and every firm has a convex production set then any Pareto-efficient allocation can be decentralized as a competitive equilibrium.
|Reference: Oxford Press Dictonary of Economics, 5th edt.|