Economics · General Equilibrium
Which statement correctly describes the relationship between the contract curve and the utility possibility frontier (UPF) in a general equilibrium model?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The contract curve and the UPF coincide directly when both consumers have identical preferences.
- 2Points inside the UPF represent Pareto optimal allocations, whereas points outside are inefficient.
- 3The UPF is always linear because utility functions are cardinal in general equilibrium analysis.
- 4The contract curve lies in consumption space, while the UPF lies in utility space; both represent the same set of Pareto optimal allocations mapped differently.✓
Correct answer
The contract curve lies in consumption space, while the UPF lies in utility space; both represent the same set of Pareto optimal allocations mapped differently.
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