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, where Bruno makes a take-it-or-leave-it offer. The figure shows Angela and Bruno’s feasible frontier and Angela’s reservation indifference curve. Now the government introduces new laws that limits Angela’s work time and/or sets a minimum pay in bushels of grain. Assume Angela has a total of 24 hours. If D is the outcome before any laws, which of the following statements is correct?
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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, where Bruno makes a take-it-or-leave-it offer. The figure shows Angela and Bruno’s feasible frontier and Angela’s reservation indifference curve. Now the government introduces new laws that limits Angela’s work time and/or sets a minimum pay in bushels of grain. Assume Angela has a total of 24 hours. If D is the outcome before any laws, which of the following statements is correct?

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Accepted Answer

If the new law limits Angela’s working hours to 10 hours and sets the minimum pay to 4.5 bushels, then the outcome will be D.

Answer

If the new law limits Angela’s working hours to 4 hours, then the outcome will be F.

Answer

If the new law limits Angela’s working hours to 8 hours and sets the minimum pay to 6.5 bushels, then the outcome will be C.

Answer

If the new law sets the minimum pay to 4.5 bushels, then the outcome will be I.

Crowdly

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

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