PS 06 - Economics 335Cornell UniversityJ. Wissink - PROBLEM...

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Economics 335Cornell UniversityJ. Wissink - PROBLEM SET 6 1. Either do the question or answer True, False, or Uncertain. Explain. a. A commodity tax that raises no revenue creates no dead-weight-loss. (Hint: I would use a "demand/supply" OR "budget-line/indifference- curve" diagram if I were you.) b. Equal lump-sum taxation for all individuals in society is both equitable as well as efficient because everyone pays the same amount of tax with a lump-sum tax. c. Lump- sum taxes must be equal across people for them to be truly lump-sum. d. Commodity taxes on goods with completely inelastic market demand curves are efficient because analytically they create no excess burden. e. Lump-sum taxes are efficient because they involve no burden what- so-ever from taxation. f. A uniform commodity tax on all goods, including leisure (assuming that's possible), would be efficient as well as desirable because no relative prices would be distorted.g. If there is a good in society for which the compensated demand is completely
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This note was uploaded on 05/06/2008 for the course ECON 3350 taught by Professor Wissink during the Spring '08 term at Cornell University (Engineering School).

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PS 06 - Economics 335Cornell UniversityJ. Wissink - PROBLEM...

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