Sep 28, 2017 term paper 2

A CONSUMER WITH UTILITY FUNCTION U = Y ½ HAS TO CHOOSE BETWEEN A JOB THAT PROVIDES INCOME Y 0 BUT…

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A consumer with utility function U = Y½  has to choose between a job that provides income Y0but no possibility of evading tax and a job that pays Y1 but makes evasion possible. What value of Y1 makes the consumer indifferent between these two jobs? How does a change in the tax rate affect this level of income?



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