Suppose the wage is 80 per hour and that the consumer has 100 hours H to work with. Suppose that the MRS is given by c/(l−10) . What will the consumer’s choices of c and l be. Repeat with an upper bound of 10 hours. Repeat both parts with a 10% tax rate for all income levels. Suppose that the tax rate has two brackets so that income from hours above (1/5)H is taxed at 20 percent. How does the solution change? Suppose that consumers must instead pay a lump sum tax that raises the same tax revenues as the one listed above. How will outcomes change?
Suppose the wage is 80 per hour and that the consumer has 100 hours H to work with. Suppose that the MRS is given by c/(l−10) . What will the consumer’s choices of c and l be. Repeat with an upper bound of 10 hours. Repeat both parts with a 10% tax rate for all income levels. Suppose that the tax rate has two brackets so that income from hours above (1/5)H is taxed at 20 percent. How does the solution change? Suppose that consumers must instead pay a lump sum tax that raises the same tax revenues as the one listed above. How will outcomes change?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose the wage is 80 per hour and that the consumer has 100 hours H to work with. Suppose that the MRS is given by c/(l−10) . What will the consumer’s choices of c and l be. Repeat with an upper bound of 10 hours. Repeat both parts with a 10% tax rate for all income levels. Suppose that the tax rate has two brackets so that income from hours above (1/5)H is taxed at 20 percent. How does the solution change? Suppose that consumers must instead pay a lump sum tax that raises the same tax revenues as the one listed above. How will outcomes change?
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