In the context of Problem 4, suppose you know that CLS's MRT of wine for garbage disposal services is $2:1$ (to obtain more bags of garbage disposal services requires a reduction of one bottle of wine (keeping inputs constant), and Brewster's MRS of wine for garbage disposal is $3:1$ (he would be indifferent between being able to get rid of three bags of garbage or taking one bottle of wine). For this society, would you recommend more garbage disposal services or more wine production or the status quo? Explain your answer.

Data from Problem 4

Combine Figures 4.2 and 4.5 into a single figure showing how much garbage disposal and wine will be produced in an economy consisting of Ivory tower Land Services (ILS-the producer) and Brewster, our consumer. Show the relative price of wine and garbage disposal services in the figure. Assume Brewster's income is fixed.

Figure 4.2 

Figure 4.5

Transcribed Image Text:

Garbage Disposal Service Wine Increasing utility