Multiple Choice
Mr. Inflexible's utility function is U(x1,x2) = min(x1,x2) . The price of x1 is $2 including a $1 excise tax, the price of x2 is $2, and Mr. Inflexible's budget is $120. Imagine substituting a lump- sum tax for the excise tax. If both taxes leave Mr. Inflexible on the same indifference curve, then the
Lump- sum tax is:
A) $30.
B) $10.
C) $20.
D) $50.
Correct Answer:
Verified
Correct Answer:
Verified
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