The contract curve
A) Shows the unique Pareto efficient allocation of a pair of goods in an Edgeworth box
B) Shows every inefficient allocation of consumption goods in an Edgeworth box
C) Does not pass through the tangencies between pairs of indifference curves in an Edgeworth box
D) Shows every efficient allocation of consumption goods in an Edgeworth box

Question

Quizplus · Accepted Answer

The contract curve in an Edgeworth box represents all the allocations of goods between two individuals that are Pareto efficient. This means that at any point on the contract curve, it is impossible to make one individual better off without making the other individual worse off. It passes through the tangencies between pairs of indifference curves, indicating that at these points, the marginal rates of substitution of the two individuals are equal, and no further mutually beneficial trades can be made.

The Contract Curve