Question

Kad Lars's Fond 16) Refer to the Figure just above. The initial allocation of resources is at point K. A new allocation that leaves James and Karen both better off is at point: Α) Α B) B C) D) D 17) Which of these statements is generally accepted by economists? Perfect competition A) provides both equity and efficiency B) provides equity but not necessarily efficiency, C) provides efficiency but not necessarily equity. D) generally satisfies neither efficiency nor equity. 18) The main point of the second theorem of welfare economics is that: A) efficiency is more important than equity. B) efficiency may be achieved, but equity is not a feasible goal. C) any attempt to achieve an equitable outcome must occur off the contract curve. D) any equitable outcome can be achieved by reallocating the resources among the members of a society

Answer 1

QUESTION: 16

The initial allocation is at ponit K . A new allocation that leaves both james and karen both better-off is at point

SOLUTION:

the option (C) i.e., at point C both will be better-off.

Beacuse at the tangency point of both contract curves , james and karen will be better-off. After joing all tangency ponits , a edgeworth contract curve will be prepared.