In an Edgeworth box, all points of efficiency occur:
A) at the intersections of the indifference curves.
B) at the points of tangency between the sets of indifference curves.
C) in the midpoint of the diagram.
D) at any point other than the intersections of the indifference curves.

Question

Quizplus · Accepted Answer

Points of efficiency occur where the indifference curves of both individuals are tangent to each other, indicating that the allocation is both Pareto efficient and feasible. These tangencies occur at points where the slope of the contract curve equals the slope of the budget constraint, and are represented by points of tangency between the two sets of indifference curves in the Edgeworth box.

In an Edgeworth Box, All Points of Efficiency Occur