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Figure 15.11 A Production Contract Curve
The production contract curve connects every point of tangency between Pancake, Inc.’s and Cereal, Inc.’s isoquants for capital and labor. Each point on the production contract curve represents a Pareto-efficient input allocation. At points H and I, relatively little cereal is produced, while relatively more pancakes are produced. At point J, no pancakes are made, while Cereal, Inc. produces the maximum amount of cereal given the available inputs.