Suppose the government decides to tax fringe benefits as ordinary income. What would happen to the slopes of the typical worker’s indifference curves? How would this affect the optimal amount of fringe benefits consumed?
a) The slopes would become steeper; the optimal amount of fringe benefits consumed would decrease.
b) The slopes would become flatter; the optimal amount of fringe benefits consumed would increase.
c) The slopes would remain unchanged; the optimal amount of fringe benefits consumed would decrease.
d) The slopes would remain unchanged; the optimal amount of fringe benefits consumed would increase.