DWL Properties Report

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2. DWL Properties
a) Suppose Bryce has income of $50,000. At the current tax rate of 10%, the DWL is 1000.
Now the tax rate increases to 20%. We do not know his elasticity of taxable income. Can we
calculate the new DWL? If so, what is it (show your work / explain)? If not, explain why not.
b) Consider the following statement. The “Ramsey’ rule for optimal commodity taxation
discussed in class will always: (i) minimize DWL and (ii) maximize social welfare. Explain
which part(s) (if any) of this statement are true.

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Tags:
elasticity

deadweight loss

DWL Properties

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