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Leslie is now Stumped. Deni wyatt explains to her that she needs to introduce a new tax system that incentivizes the productive Eagleton residents to

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Leslie is now Stumped. Deni wyatt explains to her that she needs to introduce a new tax system that incentivizes the productive Eagleton residents to voluntarily pro- duce more. Ben suggests to Leslie that she should consider introducing a constant income tax T combined with a universal transfer of T. The Pawgleton government has no external revenue needs, so all of the tax revenue from 7 will be used to fund the universal transfer. g. Write out the individual's budget constraint. (3 points) h. Derive the labor supply of Pawnee and Eagleton residents as a function of T and T. Hint: you will need to solve the individual's optimization problem. (8 points) i. Without solving for the optimal policy, argue why Ben's proposal is better than the tax system in Part d. Hint: you will need to argue that, despite sacrificing some equality, Ben's proposal is more efficient. (6 points)

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