What is the optimal tax rate, Public Economics

Assignment Help:

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?


Related Discussions:- What is the optimal tax rate

Forestry, Normal 0 false false false EN-IN X-NONE X...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Health economics, why is it important to consider the complex nature of hea...

why is it important to consider the complex nature of health and health care when examining economic principles related to health care delivery?

Case for improving upon the market system -pigovian analysis, Case for Impr...

Case for Improving upon the Market System   Unlike the "optimistic followers"  of the "classical school" who believed  that markets  would  "natural!yn  or "automatically" prod

Health Economics, 1.) In what way is insurance for medical loss/illness dif...

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

Welfare and subsidies, what are the costs and consequences of providing the...

what are the costs and consequences of providing the subsidies and welfare?

Advantages of mbis, Normal 0 false false false EN-IN ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Economic growth and world trade, The major economies in the world are in a ...

The major economies in the world are in a deep recession although there are some signs of growth. What implications has such a recession had for international business? How have go

Improvement in seea over the sna , Normal 0 false false fal...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Explain hoe perception affected theory symbolic inte, sensors see details a...

sensors see details and seek detail and precision intuitions see generalities

Valuation tool - production function approach, Normal 0 false ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd