The contract curve - Pareto efficiency within the Edgeworth box Hubert and Kate are friends who just came back from trick-or-treating. In the following Edgeworth box, Hubert and Kate's initial endowments of Snickers bars and Skittles are represented by point A. Kate's initial indifference curve is given by the inverted purple curve passing through this point, and Hubert's initial indifference curve is given by the blue curve passing through this point. Both Hubert's and Kate's utility increases as they consume more Snickers bars and Skittles. Use the black line segments (plus symbol) to draw the line representing the contract curve. (Hint: The curve should be made up of six points, starting the origin of either Hubert's or Kate's axis.) Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. Which of the following statements accurately describe the situation shown on the preceding graph? Check all that apply. O If Kate somehow were to end up with all the Snickers bars and all the Skittles, the allocation would be Pareto efficient. O Even if Kate and Hubert engage in trade, they may remain at point A. O The contract curve is independent of the initial allocation of the endowment.



Answer :

Other Questions