c. Now illustrate how the consumption possibilities frontier changes if the government uses an inefficient tax system.
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c. Now illustrate how the consumption possibilities frontier changes if the government uses an inefficient tax system. Suppose the inefficiency takes the following form: As the tax rate on the rich increases, consumption of the rich decreases as if the tax system were efficient, but the deadweight loss increases at an increasing rate as the tax rate rises, with this loss reducing the amount available for distribution to the poor.
d. Illustrate how a Rawlsian government might now not choose to equalize consumption levels between the rich and the poor.
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Related Book For
Microeconomics An Intuitive Approach With Calculus
ISBN: 9781337335652,9781337027632
2nd Edition
Authors: Thomas Nechyba
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