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Consider the consumer Mr. Magnificent, who has the utility function u(x,y) = min{ x, 2y}.  This consumer...

Consider the consumer Mr. Magnificent, who has the utility function u(x,y) = min{ x, 2y}.  This consumer has an income of $234 and the price of both x and y is $6 a unit.  Unfortunately for Mr. Magnificent, the federal government needs to raise tax revenue of $30. a. Find the consumer’s optimal basket and utility in the absence of taxes. b. If the government uses the lump‐sum approach for taxation, what is the resulting utility earned by Mr. Magnificent? c. Now, instead, the government tries a tax of $t per unit on good y.  Find what the tax t needs to be, and then find the consumer’s utility.    d. Compare the impact on the consumer from the two tax approaches.

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