suppose that Morris has the utility function U(b, w)= 6b + 6w and Philip has the utility function U(b, w)= bw.If we draw an Edgeworth box with books on the horizontal axis and wine on the vertical axis and if we measure Morris's consumptions from the lower left corner of the box, then the contract curve contains
A)a straight line with slope 1/1 passing through the upper right corner of the box.
B)a curve that gets steeper as you move from left to right.
C)a straight line running from the upper right corner of the box to the lower left.
D)a straight line with slope 1/1 passing through the lower left corner of the box.
E)a curve that gets flatter as you move from left to right.

Question

Quizplus · Accepted Answer

The contract curve is a straight line with slope 1/1 passing through the upper right corner of the box. This is because the MRS of Morris is always equal to 1, and the MRS of Philip is always equal to w/b. Therefore, the contract curve is the set of all Pareto efficient allocations, and it is a straight line with slope 1/1.

Suppose That Morris Has the Utility Function U(b, W)= 6b