ps1_f10 - Economics of Taxation Rutgers University Fall...

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Economics of Taxation Rutgers University Fall 2010 Problem Set 1: Due Monday, September 20 in class 1. You wake up one morning and find yourself in a room with Ren and Stimpy. They each have an allocation of pizza and beer. You obtain the following information through a pleasant, yet somewhat strange, conversation. Ren will trade two pizzas for one six-pack of beer and be equally happy. At the same time, Stimpy will gladly exchange six pizzas for two of his six-packs. Is the allocation of beer and pizza Pareto efficient? Illustrate using an Edgeworth box. 2. Consider an economy with two goods, food and clothing. Assume there is a tax (t) on clothing that is borne fully by consumers. In other words, the price of clothing is p c before the tax and p c (1+t) after the tax. Producers of clothing receive p c before the tax and p c after the tax. There are no other taxes, subsidies, or market imperfections in the economy. Assume also that the economy’s only inputs, capital and labor, are in fixed
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This note was uploaded on 02/08/2011 for the course ECONOMICS 101 taught by Professor June during the Spring '08 term at Rutgers.

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ps1_f10 - Economics of Taxation Rutgers University Fall...

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