Assignment:
1. The country of Adventureland has two citizens, Bill and Ted. Bill has a private legal business. He earns $50 per hour. At a tax rate of 0%, Bill works 20 hours. At a 25% tax rate, he works only 16 hours, and at a 40% tax rate, he works only 8 hours per week. Ted works in a manufacturing job. He works 20 hours per week and earns $6 per hour, regardless of the tax rate. The government is considering imposing an income tax of either 25% or 40% on Bill and using the revenues to make transfer payments to Ted.The accompanying table summarizes the three possible policies. Does either tax policy raise social welfare? Are either of the policies obviously less than optimal? Explain your answers.
2. The urban African-American community is decid-edly split on the subject of school vouchers. Sonic community leaders strongly support the voucher system and the increased school competition it brings, while others oppose it. Why do You think this split exists?
3. Many states have constitutional requirements that their budgets be in balance (or in surplus) in any given year but this is not true for the U.S. federal government. Why might it make sense to allow for the federal government to have deficits in some years and surpluses in others?
4. Proper hygiene, such as regular handwashing, can greatly limit the spread of many diseases. How might this suggest a role for public interventions? What kinds of public interventions might be possible? Suggest three distinct types of possible interventions.