Abstract
Clarke's normal cone has been frequently used to formulate the marginal cost pricing rule for nonconvex firms. The author provides examples where a firm with convex iso-output sets is not minimizing its cost at a price vector in the normal cone. For a firm to be cost minimizing under any price in the normal cone, lower hemicontinuity of the iso-output correspondence is sufficient. The author also provides an extension of the second welfare theorem with a price vector in the normal cone of each firm and cost minimization of firms. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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