5 questions 33

The economy contains two individuals, Jack and Jill. Each has a utility of U = C-L/2, where Lis the number of hours worked. Jack and Jill earn potentially different wage rates w, The government imposes a ta rate of t on income, so that the tax bill of individual I is twl, The government divides the revenue it collects in half, and gives it back to Jack and jill in the form of a lump-sum transfer.