Question 2 Consider the Rosen-Roback framework that we used to think about producer and consumer amenities, where workers must be indifferent between staying in a city and their outside option (V('r, w, (1\") = V*) and rms are competitive (C(r, m, up) = 1). Suppose that Sacramento is an average productivity city while Los Angeles is a high productivity city. The two cities have the same level of consumer amenities. (2a) Describe graphically the equilibrium rent and wage levels in these two cities as- suming that there are no federal or state taxes affecting the system (put w on the x-axis). (2b) Now suppose that there are lump-sum federal taxes, so everyone pays some xed amount T (ignore the distribution of federal government expenditures). How would the graphs above change? Assume that the rent and wage levels in Sacramento are unchanged. (2c) Now suppose that instead of a lump-sum tax, there is a federal income tax, where residents pay a xed percentage of their nominal wage in taxes (ignore the distribution of federal government expenditures). Describe graphically how this changes your graph. (2d) Now suppose that in addition to the federal income tax, there is a mortgage interest deduction that is increasing in the price of housing, and assume that all residents are homeowners (ignore the distribution of federal government expenditures). How would this change things relative to the graphs you drew for part a and part c (show graphically). Would to mortgage interest deduction increase or decrease the effect of the income tax on the system of cities