Question
Consider a competitive equilibrium with proportional taxes on wage income, where the substitution effect dominates the substitution effect. Then in the competitive equilibrium, (a) MRS`,C
Consider a competitive equilibrium with proportional taxes on wage income, where the
substitution effect dominates the substitution effect. Then in the competitive equilibrium,
(a) MRS`,C < MRT`,C and employment will be lower than what is Pareto optimal.
(b) MRS`,C < MRT`,C and employment will be higher than what is Pareto optimal.
(c) MRS`,C > MRT`,C and employment will be lower than what is Pareto optimal.
(d) MRS`,C > MRT`,C and employment will be higher than what is Pareto optimal.
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Macroeconomics Principles and Applications
Authors: Robert E. Hall, Marc Lieberman
6th edition
1111822352, 1111822354, 9781133708742 , 978-1111822354
