The figure presents a farm bargaining model where Thabo owns a farm, Musa is a farmer with
Question:
The figure presents a farm bargaining model where Thabo owns a farm, Musa is a farmer with quasilinear preferences who wishes to negotiate under voluntary exchange a sharecropping arrangement to use the farm. If Musa does not rent the farm, Thabo gets nothing. Thabo has take-it-or-leave it bargaining power. If no sharecropping agreement is reached, then Musa has access to a reservation amount of 7 bushels grain. Assume that the government imposes a new law that limits working hours to 4 hours a day, while requiring that total
pay is at least 14 bushels
Based on this information, which one of the following statements is correct?
A. The new outcome F is Pareto efficient.
- B. Only Thabo receives economic rent at F
- C. As a result of the new law, Thabo and Musa have more bargaining power.
- D. The change from D to F is not a Pareto improvement
- E. Point F is on the new contract curve
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr