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Suppose the wage is 100 per hour and that the consumer has 100 hours H to work with. Suppose that the MRS is given by

Suppose the wage is 100 per hour and that the consumer has 100 hours H to work with. Suppose that the MRS is given by c/l. What will the consumers choices of c and l be. Repeat with an upper bound of 10 hours. Repeat both parts with a 10% for all income levels. Suppose that the tax rate has two brackets so that income from hours above 1 5H is taxed at 20 percent. How does the solution change? Suppose that consumers must instead pay a lump sum tax that raises the same tax revenues as the one listed above. How will outcomes change?

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