Asked by Paige Gratton on May 26, 2024
Verified
Once a point on a contract curve has been chosen,
A) it is possible to make both individuals better off.
B) it is possible to make one individual better off only at the expense of the other.
C) there is no change that would make both individuals worse off.
D) it is impossible for both individuals to have more of both goods.
Contract Curve
In economics, it represents the set of optimal distributions of goods or resources between parties that maximizes their utility in an exchange.
- Acquire an understanding of the concepts and ramifications of Pareto optimality in different scenarios of resource distribution.
- Recognize the efficient allocation of goods in exchange economies by means of the Edgeworth box and contract curve.
Verified Answer
AM
Amanda MurrianJun 01, 2024
Final Answer :
B
Explanation :
Once a point on the contract curve has been chosen, any movement away from this point will only make one individual better off at the expense of the other, as the contract curve represents points of Pareto efficiency where any change to make one party better off would make the other party worse off.
Learning Objectives
- Acquire an understanding of the concepts and ramifications of Pareto optimality in different scenarios of resource distribution.
- Recognize the efficient allocation of goods in exchange economies by means of the Edgeworth box and contract curve.