Which of the following assumptions does not apply to Edgeworth Box discussions of general equilibrium?
A)Indifference curves are smooth and convex to the appropriate origin.
B)Both goods are essential for all consumers.
C)Economic well being is determined only by the quantities consumed.
D)All Edgeworth Box allocations are Pareto optimal.

Question

Quizplus · Accepted Answer

The assumption that all Edgeworth Box allocations are Pareto optimal does not apply. In the Edgeworth Box framework, not all allocations are Pareto optimal; only those on the contract curve are. Pareto optimality means that no individual can be made better off without making someone else worse off, and not all points within the Edgeworth Box satisfy this condition.

Which of the Following Assumptions Does Not Apply to Edgeworth