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. The figure shows Angela and Bruno’s feasible frontier and Angela’s reservation indifference curve. F is above her reservation indifference curve, and Angela’s preferences are quasi-linear. Based on this information, 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. The figure shows Angela and Bruno’s feasible frontier and Angela’s reservation indifference curve. F is above her reservation indifference curve, and Angela’s preferences are quasi-linear. Based on this information, read the following statements and select the correct one.

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Accepted Answer

F is not Pareto efficient as the marginal rate of substitution does not equal the marginal rate of transformation at this point.

Answer

Moving from F to any point on line CD is Pareto-improving.

Answer

Depending on the slope of the feasible frontier, both Bruno and Angela can be better off at F than at D.

Answer

The relative bargaining power of Bruno and Angela determines the number of hours worked along the Pareto efficiency curve.

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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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