Question

The figure below shows Angela and Bruno’s feasible frontier, Angela’s biological survival constraint, and her reservation indifference curve, when Angela would accept any offers strictly better than her reservation position of no work and 2.5 bushels of survival rations from the government.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. Then, compared to the reservation indifference curve depicted above, Angela’s new reservation indifference curve is:

Angela's biological survival constraint Angela's reservation 12 indifference curve Feasible frontier: Angela and Bruno combined Bushels of grain Economically feasible set 25_ Angela's reservation option 24 Angela's hours of free time

A. Steeper and goes through Z.

B. Shifted higher at all points.

C.The same.

DThe midpoint between the feasible frontier and the biological survival constraint.

Answer 1

Since Angela value fairness in her utility, that means to be indifferent with 24 hour leisure and 2.5 units of ration, he needs to be compensated more for each hour of work. Thus, more wage means more bushels of grain. Thus, option A is correct. It goes through Z but it should be steeper.