2.5c0.4 be the Consider the following utility maximization problem. Let u(c) = utility function, and let...

 

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2.5c0.4 be the Consider the following utility maximization problem. Let u(c) = utility function, and let the marginal cost of consumption be A = 0.5, that is, it costs 0.5c to have consumption level equal to c. Solve the utility maximization problem: (1.1) What is the optimal consumption level c*? a 1.000 b 3.175 € 2.300 Suppose that the government imposes a sales tax on consumption goods, and the tax rate is denoted by 7. Hence, if the household produces e units of consumption goods, he can only enjoy (1 - 7)e units while Tc goes to the government. This then changes the utility maximization problem into max u(c) - Ac. c20 a 2.736 b 3.175 (1.2) Find the new optimal consumption level for 7 = 1 c 1.536 max u[(1-7)c] - Ac. c20 = 20%, c**.. (1.3) How much tax revenue can the government receive from each consumer? 2.5c0.4 be the Consider the following utility maximization problem. Let u(c) = utility function, and let the marginal cost of consumption be A = 0.5, that is, it costs 0.5c to have consumption level equal to c. Solve the utility maximization problem: (1.1) What is the optimal consumption level c*? a 1.000 b 3.175 € 2.300 Suppose that the government imposes a sales tax on consumption goods, and the tax rate is denoted by 7. Hence, if the household produces e units of consumption goods, he can only enjoy (1 - 7)e units while Tc goes to the government. This then changes the utility maximization problem into max u(c) - Ac. c20 a 2.736 b 3.175 (1.2) Find the new optimal consumption level for 7 = 1 c 1.536 max u[(1-7)c] - Ac. c20 = 20%, c**.. (1.3) How much tax revenue can the government receive from each consumer?

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11 To solve the utility maximization problem we need to find the optimal consumption level c that ma... View the full answer