Eight years ago, ms. jones, a farmer, inherited a large parcel of land that had a fair market value of $150,000 at that time. she used the large parcel in her farming operations. in the current year, ms. jones decided she no longer wanted the large parcel in her farm operations, so she offered it for sale for $250,000. mr. oak approached ms. jones with an offer to exchange a small parcel (which ms. jones wanted for her farming operations) and some farm equipment for the large parcel. the small parcel had a fair market value of $200,000, and the equipment had a fair market value of $50,000.

Upscale hotels in the united states recently cut their prices by 20 percent in an effort to bolster dwindling occupancy rates among business travelers. a survey performed by a major research organization indicated that businesses are wary of current economic conditions and are now resorting to electronic media, such as the internet and the telephone, to transact business. assume a company's budget permits it to spend $5,000 per month on either business travel or electronic media to transact business. graphically illustrate how a 20 percent decline in the price of business travel would impact this company's budget set if the price of business travel was initially $1,000 per trip and the price of electronic media was $500 per hour. suppose that, after the price of business travel drops, the company issues a report indicating that its marginal rate of substitution between electronic media and business travel is 1. is the company allocating resources efficiently? explain.