11. Angela works farmland owned by Bruno. The diagram below illustrates their jointfeasible frontier. Angela's indifference curves are all assumed to have an identical slope,for any given amount of free time, and at point D the slope of Angela's indifferencecurve is identical to the slope of the feasible frontier at point C.Angela's reservationindifference curve, IC,128.IC2F:Feasible frontier: Angelaand Bruno combined162024Angela's hours of free timea) Assume that Angela's reservation option is point F. Use the framework above and atest for Pareto efficiency to establish that point F is not Pareto-efficient while pointson the line CD are.b) How might Angela and Bruno achieve a Pareto-efficient outcome? Showdiagrammatically where this will be on the diagram.Bushels of grain

Bruno is a landowner, and Angela is a farmer who gives Bruno a portion of her grain harvest in…

11. Angela works farmland owned by Bruno. The diagram below illustrates their joint feasible frontier. Angela's indifference curves are all assumed to have an identical slope, for any given amount of free time, and at point D the slope of Angela's indifference curve is identical to the slope of the feasible frontier at point C. Angela's reservation indifference curve, IC, 12 8. IC Feasible frontier: Angela and Bruno combined 16 20 24 Angela's hours of free time a) Assume that Angela's reservation option is point F. Use the framework above and a test for Pareto efficiency to establish that point F is not Pareto-efficient while points on the line CD are. b) How might Angela and Bruno achieve a Pareto-efficient outcome? Show diagrammatically where this will be on the diagram. Bushels of grain

11. Angela works farmland owned by Bruno. The diagram below illustrates their joint feasible frontier. Angela's indifference curves are all assumed to have an identical slope, for any given amount of free time, and at point D the slope of Angela's indifference curve is identical to the slope of the feasible frontier at point C. Angela's reservation indifference curve, IC, 12 8. IC Feasible frontier: Angela and Bruno combined 16 20 24 Angela's hours of free time a) Assume that Angela's reservation option is point F. Use the framework above and a test for Pareto efficiency to establish that point F is not Pareto-efficient while points on the line CD are. b) How might Angela and Bruno achieve a Pareto-efficient outcome? Show diagrammatically where this will be on the diagram. Bushels of grain

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Angela works on farmland owned by Bruno. The diagram illustrates their joint feasible frontier. Angela's indifference curves are all assumed to have an identical slope, for any given amount of free time. This means that they are all parallel. Angela and Bruno can bargain costlessly. Bushels of grain 8 12 Angela's reservation indifference curve, IC₁ IC₂ D 0 0 16 Angela's hours of free time 20 24 Feasible frontier: Angela and Bruno combined a) Assume that Angela's reservation option is at point F. Explain the meaning of "Pareto efficient" and give two ways that we know that point F is not Pareto-efficient. Explain why moving between point F and point E would not improve efficiency. (4 marks) b) How might Angela and Bruno achieve a Pareto-efficient outcome? Explain how the negotiation might work. Use indifference curves to show where this outcome will be on the diagram. (3 marks) c) Explain why it would not be Pareto-efficient to simply aim to produce the maximum total amount of grain,…