As represented by an Edgeworth box, an allocation of goods is efficient: if it i
ID: 1207510 • Letter: A
Question
As represented by an Edgeworth box, an allocation of goods is efficient:
if it is at a bundle whose consumers' indifference curves cross.
if it makes one consumer better off at the expense of the other.
if one consumer holds all of one good.
if it is at a bundle whose consumers' indifference curves are tangent to each other.
if it is at a bundle whose consumers' indifference curves cross.
if it makes one consumer better off at the expense of the other.
if one consumer holds all of one good.
if it is at a bundle whose consumers' indifference curves are tangent to each other.
Explanation / Answer
Option D is correct.
When the indifference curves of the two consumers are tangent to each other, then the allocation is considered efficient because after this point it is not possible to make anyone of them better off without making the other one worse. Connecting all these similar tangent points, we get a contract curve.
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