12 Give one method the philosophers Rawls and Nozick would use to select from a
ID: 1104644 • Letter: 1
Question
12 Give one method the philosophers Rawls and Nozick would use to select from a large set of Pareto Optimal allocations a unique candidate as a target for policy implementation. [There is no unique correct answer to this question 13 Explain what is meant by a lump-sum tax. Contrast this to a distortionary tax. The second welfare theorem recommends which one? Why does public policy tend to consist of primarily the other one? 14 Define a PPF. Provide an interpretation for the slope of a PPF. Which efficiency concept does this relate to? Give a rationale for why a competitive equilibrium solves this concept.Explanation / Answer
Answer 12: Since there is no unique answer to this you need to tell which one method to follow
Answer 13:
The fixed amount of tax paid by the tax payers regardless of their income. For instance, sales tax, excise tax, property taxes on cars and business equipments, etc. A distortionary tax leads to departure from the allocation of economic resources from the state in which agent maximizes his / her own welfare. A proportional wage tax is distortionary in nature.
The Second Welfare Theorem can be used to show that any desired distributional result could be achieved through appropriate lumpsum taxes and transfers. Thus, recommended policy packages according to second theorem of welfare economics was to achieve efficiency through competitive markets and equity through taxes and transfers that are non distortionary in nature.
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