ECON403, Public Economics

Jack and Jill live alone on an island. Their labour supply schedules are identical and given by L = (1 - t)w, where t is the income tax rate and w denotes the wage. Jill''s wage is 6 and Jack''s is 2. The tax paid by an individual is twL and each receives a transfer equal to half the total revenues. Jack and Jill have identical utility functions given by U =C - (1/2)L2
, where C denotes consumption (the individual''s income after tax and transfer). If the social welfare function is W = 3Ujack + UJill, what is the optimal tax rate?

[Hint: Write W as a function of the tax rate t.] Why is the optimal tax rate not 0? Why is
it not 1?
Posted Date: 3/17/2013 9:01:37 PM | Location : Canada

Related Discussions:- ECON403, Assignment Help, Ask Question on ECON403, Get Answer, Expert's Help, ECON403 Discussions

Write discussion on ECON403
Your posts are moderated
Related Questions

1.) In what way is insurance for medical loss/illness differ from insurance for any type of property loss?

An economy has two agents and two goods. Utilities are given by UA=min{xA,0.5yA} and UB=min{xB,0.5yB}. The total amount of X in the economy is 10. The total amount of Y is also 10.

Our economic systems are of this type and share for general properties. a) Dissipative systems transform energy and process information to maintain a state of organization that

study guide for Magruder''s American Government. the tests are supper hard

Question 1: Briefly (three or four paragraphs) give reasons for your answer. (a) In studying the public sector, economists should use either positive or normative economics

Related Goods Approaches - Indirect Substitute Approach Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInter

need assignment on supply and money

The coordination problem relates us to not only the levels of activities like research and developments (R&D) and investments but also to the behaviour of institutions that charact

Valuation Tools - Hedonic Pricing Method Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4