Question: Hello, I need the answer to this question please. Question III [15 points] Consider an economy in which the representative firm produces the final consumption
Hello, I need the answer to this question please.

Question III [15 points] Consider an economy in which the representative firm produces the final consumption good using the production function Y = =N, with z = 1.0. The economy is populated by a representative consumer whose utility function is given by U(C,1) = =01/2 + 211/2. The total number of hours available to the representative consumer is h = 1. In this economy, the government finances G by taxing the income at a rate f. 1. Solve the consumer's problem by finding the optimal leisure (") and consumption (c*). [05 points] 2. How does increase in t affect the optimal leisure? Explain. (02 points] 3. Calculate the government revenue for t = 2/5, t = 1/2, t = 2/3, and t = 3/4. [03 points] 4. Find that optimal tax rate f* that maximizes the revenue of the government. [05 points]
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
