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
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.9P
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