Question: 1. In 2005, Michigan considered cutting the general sales tax (a tax on most goods at the same rata) and replacing it with a tax on a few products. Such as insurance policies. Using Equation. discuss whether this proposal would increase or decrease efficiency.
- ½ηPbt2b
2. In the formula for excess burden given in Equation, the tax is less than one. When it is squared, the result is smaller, not bigger. Thus, having rot instead of t In the formula makes the tax less important" Comment.