An efficient contract (in the Pareto sense) occurs at the:
A) point of tangency between the firm's isoprofit curve and the labour demand curve.
B) point of tangency between the union's iso-utility (or indifference) curve and the isoquants of the firm.
C) point of tangency between the union's iso-utility (or indifference) curve and the isoprofit curve.
D) point on the labour demand curve corresponding to the alternative wage.
E) point of intersection between the firm's isoprofit curve and the labour demand curve.
Correct Answer:
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