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

question 45

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 raise the same amount of tax revenue, the lump- sum tax is:

• A)$20.
• B)$30.
• C)$10.
• D)$50.

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