In the diagram below, if legislation allows Angela to be at point F, if Angela and Bruno can bargain costlessly: Angela's reservation indifference curve, IC, Angela's best feasible 12 indifference curve when an independent farmer, CO 8 CA D F FF: Angela and Bruno combined 16 24 Angela's hours of free time Select TWO correct answers. Select one or more: а. Point F is on Angela's indifference curve so it is also Pareto efficient from her point of view. b. The final outcome could be at point H, which is a Pareto improvement. С. Movements along the contract curve between C and D can still bring Pareto improvements for either Angela or Bruno. Bushels of grain

In the diagram below, if legislation allows Angela to be at point F, if Angela and Bruno can bargain costlessly: Angela's reservation indifference curve, IC, Angela's best feasible 12 indifference curve when an independent farmer, CO 8 CA D F FF: Angela and Bruno combined 16 24 Angela's hours of free time Select TWO correct answers. Select one or more: а. Point F is on Angela's indifference curve so it is also Pareto efficient from her point of view. b. The final outcome could be at point H, which is a Pareto improvement. С. Movements along the contract curve between C and D can still bring Pareto improvements for either Angela or Bruno. 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,…
Angela's reservation indifference curve, IC, After the new law Bruno 12 gets rent EF Can Angela be better off, without reducing Bruno's 8- rent? IC, EN D' Feasible frontier: Angela and Bruno combined 16 20 Angela's hours of free time a) Angela works farmland owned by Bruno. Use the framework above and a test for Pareto efficiency to establish that points on the line EF are not Pareto efficient while points on the line CD are. b) Given that Angela and Bruno achieve a Pareto optimum explain briefly why the division of output may not be equitable. Bushels of grain 24
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