Question 7

At the same tax rate, marginal utility from consumption divided marginal revenue from income taxation for is greater for Celeste than for Lulu.The theory of optimal income taxation suggests

a- Lulu should be taxed at a lower rate than Celeste.

b- Celeste and Lulu should be taxed at the same rate.

c- Celeste should be taxed at a lower rate than Lulu.

d- Celeste and Lulu should not be taxed at all.

Question 8

Suppose a tax of $0.25 is imposed on every gallon of gasoline and this results in deadweight loss. If the tax is increased by another $0.25 per gallon,

a- deadweight loss more than doubles

b- deadweight loss doubles

c- cannot be determined

d- deadweight loss increases, but is less than double.