The following graph shows the labor market for research assistants in the fictional country of Universalia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 100. Suppose the government has decided to institute a $4-per-hour payroll tax on research assistants and is trying to determine whether the tax should be levied on the employer, the workers, or both (such that half the tax is collected from each side). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Employers field (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers field (initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage field until the quantity of labor supplied equals the quantity of labor demanded. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. (Dollars per hour)LABOR (Number of workers)Demand Supply Graph Input Tool Market for Research Assistants Wage(Dollars per hour) Labor Demanded(Number of workers) Labor Supplied(Number of workers) Demand ShifterSupply Shifter Tax Levied on Employers(Dollars per hour) Tax Levied on Workers(Dollars per hour) For each of the proposals, use the previous graph to determine the new number of research assistants hired. Then compute the after-tax amount paid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by research assistants (that is, the wage received by workers minus any taxes collected from the workers).Tax ProposalQuantity HiredAfter-Tax Wage Paid by EmployersAfter-Tax Wage Received by WorkersLevied on EmployersLevied on Workers(Number of workers)(Dollars per hour)(Dollars per hour)(Dollars per hour)(Dollars per hour)40 04 22 Suppose the government doesn't want to discourage employers from hiring research assistants and, therefore, wants to minimize the share of the tax paid by the employers. Of the three tax proposals, which is best for accomplishing this goal?The proposal in which the entire tax is collected from workers The proposal in which the tax is collected from each side evenly The proposal in which the tax is collected from employers None of the proposals is better than the ot ?Graph Input ToolMarket for Research Assistants2018Wage(Dollars per hour)416Labor Supplied(Number ofworkers)Labor Demanded(Number ofworkers)Supply250141210Demand ShifterSupply Shifter8DemandTax Levied onEmployers(Dollars per hour)Tax Levied onWorkers(Dollars per hour)42002040 080 100 120 140 180 180 200LABOR (Number of workers)WAGE (Dollars per hour)

Question

The following graph shows the labor market for research assistants in the fictional country of Universalia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 100. Suppose the government has decided to institute a $4-per-hour payroll tax on research assistants and is trying to determine whether the tax should be levied on the employer, the workers, or both (such that half the tax is collected from each side). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Employers field (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers field (initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage field until the quantity of labor supplied equals the quantity of labor demanded. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. (Dollars per hour)LABOR (Number of workers)Demand  Supply   Graph Input Tool Market for Research Assistants  Wage(Dollars per hour)     Labor Demanded(Number of workers)   Labor Supplied(Number of workers) Demand ShifterSupply Shifter  Tax Levied on Employers(Dollars per hour)   Tax Levied on Workers(Dollars per hour)   For each of the proposals, use the previous graph to determine the new number of research assistants hired. Then compute the after-tax amount paid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by research assistants (that is, the wage received by workers minus any taxes collected from the workers).Tax ProposalQuantity HiredAfter-Tax Wage Paid by EmployersAfter-Tax Wage Received by WorkersLevied on EmployersLevied on Workers(Number of workers)(Dollars per hour)(Dollars per hour)(Dollars per hour)(Dollars per hour)40   04   22    Suppose the government doesn't want to discourage employers from hiring research assistants and, therefore, wants to minimize the share of the tax paid by the employers. Of the three tax proposals, which is best for accomplishing this goal?The proposal in which the entire tax is collected from workers The proposal in which the tax is collected from each side evenly The proposal in which the tax is collected from employers None of the proposals is better than the ot ?Graph Input ToolMarket for Research Assistants2018Wage(Dollars per hour)416Labor Supplied(Number ofworkers)Labor Demanded(Number ofworkers)Supply250141210Demand ShifterSupply Shifter8DemandTax Levied onEmployers(Dollars per hour)Tax Levied onWorkers(Dollars per hour)42002040 080 100 120 140 180 180 200LABOR (Number of workers)WAGE (Dollars per hour)

Accepted Answer

Case 1: Entire tax is collected from workersThe market equilibrium wage rate is given to be $10 per…

Market for Research Assistants
	Wage (Dollars per hour)
	Labor Demanded (Number of workers)			Labor Supplied (Number of workers)

Tax Proposal	Quantity Hired	After-Tax Wage Paid by Employers	After-Tax Wage Received by Workers
Levied on Employers	Levied on Workers	(Number of workers)	(Dollars per hour)	(Dollars per hour)
(Dollars per hour)	(Dollars per hour)
4	0
0	4
2	2