Consider a society consisting of two people. Edison earns an income of $85,000 per year and Hilary earns an income of $25,000 per year. The government is considering a redistribution plan that would impose a 25% tax on Edison's income and give the revenue to Hilary. Without any incentive distortion, Edison would retain $63,750 and Hilary would end up with $46,250. However, let us assume that since Edison will not receive all the income he earns, he decides to work less and earn an income of only $75,000, of which 25%×$75,000=$18,75025%×$75,000=$18,750 will be owed in taxes. With the redistribution plan, Edison will take home an income of_______. . The $18,750 that Edison pays in taxes will be transferred by the government to Hilary. Let us assume that since Hilary now receives payment from the government, she will not work as many hours and will earn an income from work of only $24,000 instead of her initial $25,000. With the redistribution plan, Hilary's total income (including the government payment received) is now _ . Without a redistribution plan, total income in this society is _. After the redistribution plan is implemented, total income in this society is. Therefore, the redistribution plan _ total income in this society. According to the libertarian political philosophy, the government ____ implement this redistribution plan. Why? a) The government is not entitled to take money away from one person and give it to another. b)The plan benefits Hilary, who is the least well off member of society.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Consider a society consisting of two people. Edison earns an income of $85,000 per year and Hilary earns an income of $25,000 per year. The government is considering a redistribution plan that would impose a 25% tax on Edison's income and give the revenue to Hilary.

Without any incentive distortion, Edison would retain $63,750 and Hilary would end up with $46,250. However, let us assume that since Edison will not receive all the income he earns, he decides to work less and earn an income of only $75,000, of which 25%×$75,000=$18,75025%×$75,000=$18,750 will be owed in taxes.

With the redistribution plan, Edison will take home an income of_________.

The $18,750 that Edison pays in taxes will be transferred by the government to Hilary. Let us assume that since Hilary now receives payment from the government, she will not work as many hours and will earn an income from work of only $24,000 instead of her initial $25,000.

With the redistribution plan, Hilary's total income (including the government payment received) is now _____

Without a redistribution plan, total income in this society is _____. After the redistribution plan is implemented, total income in this society is____. Therefore, the redistribution plan ___ total income in this society.

According to the libertarian political philosophy, the government ____ implement this redistribution plan. Why?

a) The government is not entitled to take money away from one person and give it to another.

b)The plan benefits Hilary, who is the least well off member of society.

c) Total societal utility will increase if the plan is enacted.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions