Determining Bruno's Profit-Maximizing Allocation under Coercion

Angela's Survival Constraint as a Limit on Bruno's Power

Figure 5.3c - Bruno's Preferences for Grain and Angela's Free Time

In a scenario involving a landowner and a farmer, the landowner's well-being is determined solely by the amount of grain they receive. The landowner is unconcerned with the amount of free time the farmer has. If we were to map the landowner's preferences on a graph with the farmer's free time on the horizontal axis and the amount of grain on the vertical axis, which of the following statements would be true regarding the landowner's indifference curves?

Landowner's Preferences and Indifference Curves

Consider a situation with a landowner and a farmer, where the landowner's well-being depends solely on the quantity of grain they receive. Given this, the landowner would prefer an outcome where the farmer works 8 hours a day and the landowner receives 4.5 bushels of grain, over an outcome where the farmer works 12 hours a day and the landowner receives 4 bushels of grain.

Landowner's Preference Evaluation

Consider a model with a farmer and a landowner. The landowner's satisfaction is determined solely by the amount of grain they receive and is unaffected by the farmer's hours of free time. If an allocation where the farmer has 12 hours of free time and the landowner receives 5 bushels of grain represents one point on the landowner's indifference curve, which of the following points would also lie on the same indifference curve?

Evaluating Economic Advice

Match each description of an individual's preferences for two goods (Good X on the horizontal axis and Good Y on the vertical axis) with the corresponding shape of their indifference curves.

Analyzing a Landowner's Preferences

A landowner's well-being depends exclusively on the quantity of grain they receive. They are completely unconcerned with the amount of free time a farmer has or the number of hours the farmer works. Given the four potential outcomes below, which statement accurately analyzes the landowner's preferences regarding these outcomes?

• Outcome A: Farmer has 14 hours of free time, Landowner receives 4 bushels of grain.
• Outcome B: Farmer has 12 hours of free time, Landowner receives 5 bushels of grain.
• Outcome C: Farmer has 10 hours of free time, Landowner receives 5 bushels of grain.
• Outcome D: Farmer has 8 hours of free time, Landowner receives 4.5 bushels of grain.

Consider a landowner whose well-being is determined only by the amount of grain they receive. They are offered two different land-use contracts. Contract X results in the farmer working 10 hours per day and the landowner receiving 5 bushels of grain. Contract Y results in the farmer working 14 hours per day and the landowner also receiving 5 bushels of grain. From the landowner's perspective, Contract Y is preferable to Contract X.