Asked by Gordana Zezovski on Jun 26, 2024
Verified
In an Edgeworth box, all points of efficiency occur:
A) at the intersections of the indifference curves.
B) at the points of tangency between the sets of indifference curves.
C) in the midpoint of the diagram.
D) at any point other than the intersections of the indifference curves.
Edgeworth Box
A visual representation used in economics to show the distribution of resources and the efficiency of trading between two individuals.
Efficiency
Describes the extent to which time, effort, or cost is well-used for the intended task or purpose, often aiming for the maximum output from a given set of resources.
Indifference Curves
Graphical representations in economics showing combinations of goods among which a consumer is indifferent, meaning they have no preference for one combination over another.
- Uncover the best distribution of goods within exchange economies through analysis with the Edgeworth box and contract curve.
Verified Answer
LO
Larry OmelaJun 27, 2024
Final Answer :
B
Explanation :
Points of efficiency occur where the indifference curves of both individuals are tangent to each other, indicating that the allocation is both Pareto efficient and feasible. These tangencies occur at points where the slope of the contract curve equals the slope of the budget constraint, and are represented by points of tangency between the two sets of indifference curves in the Edgeworth box.
Learning Objectives
- Uncover the best distribution of goods within exchange economies through analysis with the Edgeworth box and contract curve.