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1. Under assumptions of the commodity tax model discussed in class, we showed that the optimal (proportional) tax rates on two different are related by
1. Under assumptions of the commodity tax model discussed in class, we showed that the optimal (proportional) tax rates on two different are related by where z are tax rates T2 and n, are own elasticities of demand. Suppose that the size of the market for good 2 doubled but the elasticity remained unchanged and the amount of revenue that we want to collect has not changed either. How should the optimal tax rates be adjusted
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