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What does the contract curve in an Edgeworth production box signify? Why do competitive markets generate equilibriums that lie on the contract curve?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

What does the contract curve in an Edgeworth production box signify? Why do competitive markets generate equilibriums that lie on the contract curve?

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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