5. Suppose the wage is 80 per hour and that the consumer has 100 hoursH to work with. Suppose that the MRS is given by in: What will1the consumer's choices of c and I be. Repeat with an upper boundof 10 hours. Repeat both parts with a 10% tax rate for all incomelevels. Suppose that the tax rate has two brackets so that income fromhours above H is taxed at 20 percent. How does the solution change?Suppose that consumers must instead pay a lump sum tax that raisesthe same tax revenues as the one listed above. How will outcomeschange?

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Asked Dec 4, 2019
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5. 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 in: What will
1
the consumer's choices of c and I 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 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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5. 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 in: What will 1 the consumer's choices of c and I 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 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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Expert Answer

Step 1

The budget constraint of the individual can be written as follows:

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C=100(100 – 1) C+1001 = 104

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Step 2

The equation policy is that the MRS is equal to which means that at the equation, the MRS equals wages equals is 100, C equals to 100l. The budget constraint of the economy can be expressed as follows:

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СТС - 10° 10* С- 2 5,000

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Step 3

Thus, the value of ‘l’ c...

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C 1001 c 1= 100 5,000 100 50

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