Question

Curve shows the allocation of goods between two consumers, or of two inputs between two production functions

• A. Pareto Curve
• B. Preference Curve
• C. Contract Curve
• D. Competitive Curve

Hint:

Whenever the question talks about efficient allocation between two consumers or two producers in an Edgeworth box, the answer is Contract Curve.

Answer 1

The Correct Option is C

Concept: A contract curve is used in welfare economics and general equilibrium analysis. It shows efficient allocations between two consumers or efficient allocation of two inputs between two firms.

Step 1: Understanding allocation between two consumers.
When two consumers exchange two goods, the Edgeworth box is used to show possible allocations. The contract curve shows all Pareto-efficient allocations between them. \[ \text{Contract Curve} = \text{Set of Pareto-efficient allocations} \]

Step 2: Understanding allocation between two production functions.
In production analysis, a contract curve can also show efficient allocation of two inputs between two producers or production functions.

Step 3: Eliminating wrong options.
A Pareto curve is not the standard name for this allocation curve.
A preference curve only shows consumer preferences.
A competitive curve is not the correct term in this context. Therefore, the curve that shows allocation of goods between two consumers or inputs between two production functions is the Contract Curve.