Problem 2 :

a) prove that the first welfare theorem for pure exchange economies, demonstrated in class, continues to hold if strict monotonicity of preferences is replaced by local nonsatiation for each consumer

(b) if there are consumption externalities (for example, i care about the color of shirt you wear), is the theorem still true? if so, explain why. if not, explain where it breaks down.

Portia grant is an employee who is paid monthly. for the month of january of the current year, she earned a total of $8,388. the fica tax for social security is 6.2% of the first $118,500 earned each calendar year and the fica tax rate for medicare is 1.45% of all earnings. the futa tax rate of 0.6% and the suta tax rate of 5.4% are applied to the first $7,000 of an employee's pay. the amount of federal income tax withheld from her earnings was $1,391.77. what is the total amount of taxes withheld from the portia's earnings?