Economics · General Equilibrium
Read the following statements: Assertion (A): In the Edgeworth box, every point on the contract curve represents a Pareto optimal allocation, but not every Pareto optimal allocation is necessarily a competitive equilibrium from a given initial endowment. Reason (R): A competitive equilibrium requires that the price ratio line passing through the contract curve must also pass through the initial endowment point without requiring lump-sum transfers. Choose the correct option:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A is false, but R is true.
- 2A is true, but R is false.✓
- 3Both A and R are true, but R is NOT the correct explanation of A.
- 4Both A and R are true, and R is the correct explanation of A.
Correct answer
A is true, but R is false.
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