Figure 5.11 - Summary of the Coercion Model Outcome (Case 1)

Map of the Mita System Boundary in Peru and Bolivia

In a two-person economy, Person A is forced to work 12 hours a day to produce 20 bushels of wheat. Person B, who enforces this arrangement, takes 19 bushels and leaves Person A with 1 bushel, which is just enough to survive. Given the production possibilities, it is impossible to produce more than 20 bushels with 12 hours of work. Which statement accurately analyzes this allocation?

Efficiency vs. Fairness in a Survival Scenario

An economic allocation where one person is forced to work for another and receives only a subsistence share of the output, while the other person receives the large surplus, cannot be Pareto efficient because it is fundamentally unfair.

The Paradox of Unfair Efficiency

A landowner forces a farmer to work 10 hours a day, which produces a total of 100 bushels of grain. This is the maximum possible output given the current technology. The landowner takes 95 bushels, leaving the farmer with 5 bushels, which is just enough for survival. Match each of the following alternative scenarios with its correct economic description, relative to this initial situation.

Evaluating Pareto Efficiency as a Sole Criterion

In a two-person economy, Person A is forced to work to their maximum capacity, producing 10 units of a good. Person B, who enforces this arrangement, takes 9 units and leaves Person A with 1 unit, which is just enough for survival. Given the production possibilities, it is impossible to produce more than 10 units. Which of the following statements best analyzes this situation from an economic efficiency perspective?

Analyzing Changes to a Coercive Allocation

Fairness as a Criterion for Preferring Allocation L over D

Incomparability of Allocations D and L under the Pareto Criterion

Analyzing a Proposed Change to a Coercive Allocation

An economic outcome where one person performs all the labor to produce a good and receives only a subsistence share of the output, while another person who does no labor receives the large surplus, can be described as highly unequal. Despite this inequality, if no change can be made to give the laborer a larger share without reducing the other person's share, the outcome is technically defined as __________.

The Paradox of Unfair Efficiency