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In a general equilibrium allocation, the real wage can exceed the workers’ marginal product of labor.
Explain why this is true or false.
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- The following graph shows the labor market for research assistants in the fictional country of Academia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 250. 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…If, for example, household A’s tax share is above S, how do we perceive (or interpret) this allocation? What if A’s tax share is below S?Economic theory states that a wage set above the equilibrium will create a surplus of labor (unemployment). Are unions creating a surplus of labor? Explain your answer. Entrepreneurs absorb the risk of starting and running a company. Is Kennedy right about allowing employers to set the wage and not the employee? Explain your answer.
- The following graph shows the labor market for research assistants in the fictional country of Collegia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 200. 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…The minimum wage in year 1 is $1 higher than the equilibrium wage. In year 2, the minimum wage is increased so that it is $2 above the equilibrium wage. We observe that the same number of people are working at the minimum wage in year 2 as in year 1. Does it follow that an increase in the minimum wage does not cause some workers to lose their jobs? Explain your answerA change to personal income tax rates has both an income and a substitution effect on labor supply. If personal income tax rates decline, a. the income effect would lead people to decrease labor supply while the substitution effect would lead people to increase labor supply b. the income effect would lead people to increase labor supply while the substitution effect would lead people to decrease labor supply c. both the income effect and the substitution effect would lead people to increase labor supply d. both the income effect and the substitution effect would lead people to decrease labor supply
- Suppose that the government imposes a proportional income tax on the representative consumer’s wage income. That is, the consumer’s wage income is w(1 − τ )(h − l) where τ is the tax rate. (a) Determine effect of a decrease in income tax on consumption and labor supply. Explain your results in terms of income and substitution effects. Show the income and substitution effect in a graph. (b) Is your answer in (1) consistent with the observation that hours of work in European countries is about 30% less than in the U.S, while the average income tax rate is about 60% in European countries and 40% those in the U.S.? Under what condition? Please show all your work. Please do all parts of eth question. Thank you for yourhelp.Suppose a binding minimum wage is imposed on the labor market, then basic microeconomics predicts that, a shortage of labor will occur, hence unemployment increases. a surplus of labor will occur, hence unemployment increases. a shortage of labor will occur, hence unemployment decreases. a surplus of labor will occur, hence unemployment decreases.Is point E Pareto efficient allocation? Explain your answer.
- What are the values of PX and PY in the general competitive equilibrium of this economy? Why?What situation do we have in the following allocations, suppose that we can make a total of 100 goods? Surplus or Shortage 1. Minimum Wage Laws 2. Rent Control Laws 3. Salary caps 4. Minimum Tobacco Prices 5. Price Gauging LawsExplain why a binding price ceiling on a good is likely to cause misallocation of the consumption of the good among consumers, but not misallocation of the production of the good among firms.