Question: pleas show the process, thank you! 2.(40 marks) Consider an economy in which the individuals differ only in their income-generating ability aj, i E {1,2,

pleas show the process, thank you!
2.(40 marks) Consider an economy in which the individuals differ only in their income-generating ability aj, i E {1,2, ...,5}. Suppose that the mean ability level, , is exactly the same as the median ability, am, i.e. = am; and that the pre-tax income of each individual i is yi = a;. Further suppose that all tax revenue is redistributed through a uniform lump-sum grant g that can only be used by each individual for some special consumption activity (that is, 5g equals the total tax revenue), and each individual is utility function is u(t, g) = 1 + (1 t)aj, where t is the proportional income tax rate. Find the equilibrium tax rate under the majority voting when am > 2.(40 marks) Consider an economy in which the individuals differ only in their income-generating ability aj, i E {1,2, ...,5}. Suppose that the mean ability level, , is exactly the same as the median ability, am, i.e. = am; and that the pre-tax income of each individual i is yi = a;. Further suppose that all tax revenue is redistributed through a uniform lump-sum grant g that can only be used by each individual for some special consumption activity (that is, 5g equals the total tax revenue), and each individual is utility function is u(t, g) = 1 + (1 t)aj, where t is the proportional income tax rate. Find the equilibrium tax rate under the majority voting when am >
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