Mr Inflexible's Utility Function Is U(x₁,x₂)= Min(x_1,x₂)

question 26

Multiple Choice

Mr. Inflexible's utility function is U(x₁,x₂) = min(x_1,x₂) . The price of x₁ is $1, the price of x₂ is $2, and Mr. Inflexible's budget is $120. If Mr. Inflexible were given the choice between a lump- sum tax and an excise tax which raised the same amount of tax revenue, then:

• A)he would prefer the excise tax.
• B)he would prefer the lump- sum tax.
• C)he would be indifferent between them.
• D)one cannot say which tax he would prefer.

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