Which of the following is true of the contract curve?
A)All points on the contract curve are potential points of equilibrium but not all are efficient.
B)All points on the contract curve are potential points of equilibrium and are efficient.
C)A movement from one point on the contract curve to another reduces total welfare.
D)The midpoint of the contract curve is the most efficient point because it is the most equitable.

Question

Quizplus · Accepted Answer

The contract curve represents the set of efficient and feasible allocations that maximize total welfare. All points on the contract curve are potential points of equilibrium and are efficient, making choice B the correct answer. A movement along the contract curve does not reduce total welfare, but instead represents a reallocation of resources that can improve the welfare of one or both parties involved. The midpoint of the contract curve may not be the most efficient point, as it depends on the specific preferences and constraints of the individual parties involved.

Which of the Following Is True of the Contract Curve