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Bruno's Profit Maximization Strategy under Coercion
Bruno's Profit Incentive to Decrease Angela's Free Time When MRS < MRT
When Angela works for fewer than eight hours, resulting in more than 16 hours of free time, her indifference curve is flatter than the feasible frontier. This indicates that her Marginal Rate of Substitution (MRS) is less than the Marginal Rate of Transformation (MRT). In this scenario, Bruno can increase his profit by reducing Angela's free time. The reason is that the extra grain produced from an additional hour of her work is greater than the amount of grain needed to compensate her and keep her on her reservation indifference curve (IC1).
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Introduction to Microeconomics Course
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MRS = MRT for Profit Maximization under Coercion
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