*4.18 The government collects a specific tax of t for each hour worked. Thus, a worker whose...

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*4.18 The government collects a specific tax of t for each hour worked. Thus, a worker whose wage is w keeps w - t after taxes and supplies H(w - t) hours of work. The government wants to know if its tax revenue will increase or decrease if it lowers t. Show that how the tax revenue changes depends on the elasticity of supply of labor, η. (Hint: See Solved Problem 5.6.) M

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