8. Suppose there are only two people in an economy. Under the income tax system,

Question

8. Suppose there are only two people in an economy. Under the income tax system, the marginal revenue ofa 1% tax increase on Harry is S50 and the marginal revenue of a 1% tax increase on Sally is S30. The marginal utility of Harry is 30 utils and the marginal utility of Sally is 20 utils. Which option will make the tax system optimal without affecting total government revenues? A. Harry should be taxed more and Sally should be taxed less. B. Sally should be taxed more and Harry should be taxed less. C. The tax system is already optimal. D. More economic information is necessary to answer the question. 9. In a labor market, suppose govemment levies a payroll tax on employers to fund a workers' compensation program (WC) to form a tax-benefit linkage. If workers value the benefit of the workers' compensation less than the cost to the employers, then: A. the wages of the workers will rise. B. there is a deadweight loss. C. there is no deadweight loss. D. more information is necessary to determine if there is a deadweight loss. 10. Which of the following descriptions best defines the intertemporal budget constraint? A. an amount equal to the person's total income the measure of the person's preference for consumption in one period relative to his or her preference in other periods the measure of the rate at which people can trade off consumption in one period for consumption in another period B. C. D. the opportunity cost of first-period consumtion 11. Which statement about the standard intertemporal choice model is TRUE? A. People save in order to smooth consumption over time B. C. D. People gain utility directly by working. For most people, it is optimal to set consumption equal to income each year A dollar to be today received in 10 years is worth the same amount as a dollar received

Explanation / Answer

Suppose there are only two people in an economy. Under the income tax system, the marginal revenue of a 1% tax increase on Harry is $50 and the marginal revenue of a 1% tax increase on Sally is $30. The marginal utility of Harry is 30 utils and the marginal utility of Sally is 20 utils. Which option will make the tax system optimal without affecting total government revenues?

Correct Answer;- Harry should be taxed more and Sally should be taxed less.

In a labor market, suppose government levies a payroll tax on employers to fund a workers' compensation program (WC) to form a tax-benefit linkage. If workers value the benefit of the workers' compensation less than the cost to the employers, then:

Correct Answer:- there is a deadweight loss.

Which of the following descriptions best defines the intertemporal budget constraint?

Correct Answer:- the measure of the person's preference for consumption in one period relative to his or her preference in other periods

Which statement about the standard intertemporal choice model is TRUE?

Correct Answer:- People save in order to smooth consumption over time.

Which of the following descriptions best defines the intertemporal budget constraint?

Correct Answer:- the measure of the person's preference for consumption in one period relative to his or her preference in other periods

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