The set of efficient (Pareto-optimal) allocations that cannot be improved upon by any agent acting alone (in an individually rational manner) or by any group of agents acting together is called the
A) contract
B) core
C) indifference region

Question

Quizplus · Accepted Answer

The definition given in the question describes the core of an economy. The core includes all the Pareto-optimal allocations that are also individually rational and cannot be blocked by any group of agents. Therefore, B) core is the correct choice. A) contract and C) indifference region do not capture this idea of efficiency and individual rationality in the same way as the core.

The Set of Efficient (Pareto-Optimal) Allocations That Cannot Be Improved