Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. Angela and Bruno’s feasible frontier is downward sloping and concave, while Angela’s reservation indifference curve is downward sloping and convex (as shown in the figure). If Bruno has all the bargaining power, read the following statements and select the correct one.
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Question

Bruno is a landowner and Angela is a farmer who pays a share of her grain output to Bruno for the use of the land. Angela and Bruno’s feasible frontier is downward sloping and concave, while Angela’s reservation indifference curve is downward sloping and convex (as shown in the figure). If Bruno has all the bargaining power, read the following statements and select the correct one.

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Answer

When the MRT of work hours into grain output is greater than the MRS of work hours into subsistence requirements, then Bruno should decrease Angela’s free time.

Answer

When the MRT of work hours into grain output is lower than the MRS of work hours into subsistence requirements, then Angela’s allocation of grain should be increased.

Answer

Angela’s most preferred option is where the MRT equates her MRS.

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Bruno is a landowner and Angela is a farmer who pays a share of her grain output...

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