Suppose you were a benign government who wanted to improve Angela’s situation, but without sacrificing the aim of Pareto Efficiency. One policy advisor tells you that all you need to do to achieve this is to improve Angela’s reservation option. Is this correct?
Suppose you were a benign government who wanted to improve Angela’s situation, but without sacrificing the aim of Pareto Efficiency. One policy advisor tells you that all you need to do to achieve this is to improve Angela’s reservation option. Is this correct?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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1.Suppose you were a benign government who wanted to improve Angela’s situation, but without sacrificing the aim of Pareto Efficiency. One policy advisor tells you that all you need to do to achieve this is to improve Angela’s reservation option. Is this correct?
Transcribed Image Text:Angela's biological
survival constraint
Angela's reservation
indifference curve
12
A.
D
4.5-
4
What Angela
gets
Feasible frontier:
Angela and Bruno
combined
13 16
24
Angela's hours of free time
MRS = MRT again
When Angela works 8 hours, the MRT is equal to the MRS on Angela's reservation
indifference curve, as shown by the slopes.
Figure 5.7a Bruno's take-it-or-leave-it proposal when Angela can refuse.
Bushels of grain
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