Asked by Oluwatosin Ajirotutu on Jul 20, 2024
Verified
All possible efficient allocations of 2 goods between 2 people are located on:
A) the indifference curve.
B) the contract curve.
C) the production possibilities frontier.
D) the budget line.
Efficient Allocations
An economic condition where resources are distributed in the most effective manner, allowing for the optimization of outputs from given inputs without waste.
Contract Curve
In economics, it represents the locus of points indicating the optimal distribution of resources between parties in an Edgeworth box diagram.
Indifference Curve
A graph showing combinations of two goods that give a consumer equal satisfaction and utility.
- Pinpoint effective resource distribution in exchange markets via the Edgeworth box and contract curve analysis.
Verified Answer
KC
Kylie-Ann ConardJul 25, 2024
Final Answer :
B
Explanation :
The contract curve represents the set of all efficient allocations that maximize both individuals' utility given their preferences and endowments. Any point on the contract curve cannot be improved upon without making one individual worse off. Therefore, the best choice would be from the set of efficient allocations on the contract curve.
Learning Objectives
- Pinpoint effective resource distribution in exchange markets via the Edgeworth box and contract curve analysis.