The contract curve in an Edgeworth Box diagram illustrates
A) the only efficient allocation of goods among individuals.
B) all possible efficient allocations of goods among individuals.
C) all equitable distributions of goods among individuals.
D) the only equitable distribution of goods among individuals.

Question

Quizplus · Accepted Answer

The contract curve in an Edgeworth Box diagram illustrates all possible efficient allocations of goods among individuals. It represents the set of points at which both individuals are willing to trade and are better off as a result. Any point inside the contract curve is Pareto inefficient, and any point outside the contract curve is unattainable. Therefore, the contract curve shows the limits of mutually beneficial trade between individuals.

The Contract Curve in an Edgeworth Box Diagram Illustrates