If one is on the contract curve
A)The allocation is not Pareto optimal
B)The indifference curves of both consumers are crossing
C)No further voluntary trade will occur
D)Further beneficial trades can occur

Question

Quizplus · Accepted Answer

On the contract curve, the allocation is Pareto optimal, meaning that no further voluntary trade can lead to a better outcome for one consumer without making the other worse off. Thus, option C is the correct answer. Option A is incorrect because being on the contract curve means that the allocation is Pareto optimal. Option B is incorrect because the indifference curves of both consumers cannot cross on the contract curve. Option D is incorrect because the contract curve represents the highest feasible mutual utility attainable by both consumers, so no further beneficial trades can occur.

If One Is on the Contract Curve