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Show how moving from a lump sum tax to a linear tax affects outcomes in terms of output and work effort. What is the effect
Show how moving from a lump sum tax to a linear tax affects outcomes in terms of output and work effort. What is the effect on economic efficiency? Explain through a diagram how this change in policy leads to an outcome that is not Pareto Optimal. You should use a linear PPF (so that the wage without distortions is constant everywhere).
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