PLEASE ANSWER ASAP!!! ONLY ANSWER NUMBER 2. NUMBER 1 IS JUST FOR REFERENCE.

SUBJECT: PUBLIC FINANCE

YOU NEED THE STUDENT ID TO ANSWER THESE QUESTIONS:

STUDENT ID: 849028552

1. Consider an individual whose preferences are: u(c, 1 l) = ln(c) + ln(100 l). First, take the last digit of your ID, say number N. The weight on leisure (the parameter ) is equal to 2+(N/5). Next, consider the last two digits of your ID and add $20, that would be your hourly wage.

(a) What is the optimal labor and consumption in the absence of any taxes or transfers?

(b) Suppose now that the government introduces a progressive tax schedule. The rst $500 of income are taxed at 20%, and any additional income above $500 is taxed at (40+N) percent, where N is the last digit of your ID. What is the impact of such a policy on this individual's consumption and hours worked?

(c) What is the total amount of taxes paid by this individual? What are the average and the marginal tax rate that this individual faces?

(d) Compare this policy with a policy where this individual faces a proportional tax equal to the average tax you calculated in part (c).

2. Repeat exercise 1 for somebody who has an hourly wage three times as large.