The figure shows Angela and Bruno’s feasible frontier and her reservation indifference curve, when Angela would accept any offers strictly better than her reservation position of no work and 2 bushels of government hand-out. Now consider the case where Angela cares about the fairness of distribution, such that she can reject an offer that she considers unfair and choose not to work. In such a case Bruno will also receive no income. Read the following statements comparing the new reservation indifference curve to the reservation indifference curve depicted in the figure and select the correct one.
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Question

The figure shows Angela and Bruno’s feasible frontier and her reservation indifference curve, when Angela would accept any offers strictly better than her reservation position of no work and 2 bushels of government hand-out. Now consider the case where Angela cares about the fairness of distribution, such that she can reject an offer that she considers unfair and choose not to work. In such a case Bruno will also receive no income. Read the following statements comparing the new reservation indifference curve to the reservation indifference curve depicted in the figure and select the correct one.

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Accepted Answer

The new reservation indifference curve is steeper and goes through Z.

Answer

The new reservation indifference curve is shifted higher.

Answer

The new reservation indifference curve is the same.

Answer

The new reservation indifference curve is shallower.

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The figure shows Angela and Bruno’s feasible frontier and her reservation indiff...

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