The Edgeworth box illustrates possibilities for Karen and James to increase their satisfaction by trading goods. If point A gives the initial allocation of food and clothing, a movement into the shaded area:
A) leaves Karen better off, but James worse off.
B) leaves James better off, but Karen worse off.
C) leaves James and Karen worse off.
D) leaves James and Karen better off.

Question

The Edgeworth box illustrates possibilities for Karen and James to increase their satisfaction by trading goods. If point A gives the initial allocation of food and clothing, a movement into the shaded area: 
A) leaves Karen better off, but James worse off. 
B) leaves James better off, but Karen worse off. 
C) leaves James and Karen worse off. 
D) leaves James and Karen better off.

Quizplus · Accepted Answer

The shaded area inside the Edgeworth box represents Pareto efficient allocations, which means both Karen and James can be made better off without making the other worse off. Therefore, a movement into the shaded area will leave both Karen and James better off. Choice D is the only option that reflects this concept.

The Edgeworth Box Illustrates Possibilities for Karen and James to Increase