Question 1:This question asks you to reconsider the model of optimal sin taxes that we studied in class witha different distribution of types. Assume that everyone has p65 and y= 40. Assume further thatproportion o of the population has B = 0.85 while proportion 1– o has B = 1 (both types have8 = 1).(a) As a function of o and t, what is the uniform lump-sum transfer?(b) As a function of o and t, derive an expression for social welfare.(c) Solve for the optimal tax.(d) How does the optimal tax depend on ø? Provide some intuition for this answer.

Given data- Type 1: Proportion (δ) = 0.15, β = 1- Type 2: Proportion (1-δ) = 0.85, β = 0.85- ρ = 65-…

Question 1: This question asks you to reconsider the model of optimal sin taxes that we studied in class with a different distribution of types. Assume that everyone has p = = 65 and y=40. Assume further that proportion of the population has ß = 0.85 while proportion 1 - o has = 1 (both types have 8 = 1). (a) As a function of and t, what is the uniform lump-sum transfer? (b) As a function of and t, derive an expression for social welfare. (c) Solve for the optimal tax. (d) How does the optimal tax depend on o? Provide some intuition for this answer.

Question 1: This question asks you to reconsider the model of optimal sin taxes that we studied in class with a different distribution of types. Assume that everyone has p = = 65 and y=40. Assume further that proportion of the population has ß = 0.85 while proportion 1 - o has = 1 (both types have 8 = 1). (a) As a function of and t, what is the uniform lump-sum transfer? (b) As a function of and t, derive an expression for social welfare. (c) Solve for the optimal tax. (d) How does the optimal tax depend on o? Provide some intuition for this answer.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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