Question: Under a welfare plan, poor people are given a lump-sum payment of L. If they accept this welfare payment, they must pay a high marginal

Under a welfare plan, poor people are given a lump-sum payment of L. If they accept this welfare payment, they must pay a high marginal tax rate, α = 1/2, on anything they earn. If they do not accept the welfare payment, they do not have to pay a tax on their earnings. Show that whether an individual accepts welfare depends on the individual's tastes?

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