Consider the example of Angela and Bruno discussed in The Economy textbook, Unit 5 Section 5.9 and Figure 5.9. In Figure 5.9 (reproduced below), points D and F are the outcomes before and after the introduction of a new law that limits Angela's work time to four hours a day, while also requiring a minimum pay of 4.5 bushels. Based on this information, answer the following questions:

1. "The change from D to F is a Pareto improvement". Is this statement correct or false? Please discuss your answer making reference to the diagram. (3 marks)

1. "The new outcome F is Pareto efficient". Is this statement correct or false? Please discuss your answer making reference to the diagram. (3 marks)

1. What is the maximum amount of grain per year that Angela would be willing to pay so that the law passed? Explain your answer using the diagram. (3 marks)

1. "As a result of the new law, Bruno receives no economic rent". Is this statement correct or false? Please discuss your answer making reference to the diagram. (3 marks)

1. "The outcome D is NOT Pareto efficient because Bruno obtained all economic rent and Angela obtained no rent". Is this statement correct or false? Please discuss your answer making reference to the diagram. (3 marks)

1. Now assume that the law has been amended so that a longer work day is permitted if both parties agree. The workers maintain the right for a 4-hour day if no agreement is reached. Thus, Bruno would like to negotiate a longer work day for Angela because he believes that there are many "win-win" possibilities available to them. Would you agree with him? If yes, explain your answer by using the concepts of "joint surplus" and the "Pareto efficiency curve". Show all alternatives that could result in a better deal for both on the diagram. (5 marks)

Angela's reservation 12 indifference curve, IC, C 9 IC, m Bushels of grain 6.5 45- D F What Angela gets Feasible frontier: Angela and Bruno combined 0 O 16 20 24 Angela's hours of free time