The accompanying diagram shows an Edgeworth box economy. The initial endowment is point O. At current relative prices, Augie chooses point X and Bev chooses point Y
-Refer to Edgeworth Box Economy.Based on the situation shown in the diagram,we can conclude that
A) Augie and Bev have reached a competitive equilibrium.
B) the relative price of food must rise to clear the market.
C) both point X and point Y must lie on the contract curve.
D) there is a shortage of clothing and a surplus of food.
Correct Answer:
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