Suppose the demand and supply curves for unskilled labor in the labor market are as shown in the following figure. Congress is about to enact a $12 per-hour minimum wage. Congressional staff economists are urging legislators to consider adopting an earned-income tax credit instead. Suppose neither workers nor employers would support that proposal unless the expected value of each party's economic surplus would be at least as great as under the minimum wage. a. In the graph below, use the point tool provided 'Wmin' to indicate the wage and employment combination that would result in a $12 per-hour minimum wage. W ($/hour) 24 20 16 12 8 0 Labor Market D L (person-hours/day) S 4,000 8,000 12,000 16,000 20,000 24,000 Tools Wmin b. Calculate the amounts by which employer surplus and worker surplus change as a result of the minimum wage. Employer surplus would be (Click to select) by $ per day. Worker surplus would be (Click to select) by $ per day. c. Which of the following describes both an earned-income tax credit and a tax that would raise enough money to pay for it that would receive unanimous support from both workers and employers? A tax of $14,000 levied on employers used to fund an earned-income tax credit of $1.80 per hour. A tax of $12,000 levied on employers used to fund an earned-income tax credit of $1.20 per hour. A tax of $20,000 levied on employers used to fund an earned-income tax credit of $2.00 per hour. A tax of $16,000 levied on employers used to fund an earned-income tax credit of $1.60 per hour.
Suppose the demand and supply curves for unskilled labor in the labor market are as shown in the following figure. Congress is about to enact a $12 per-hour minimum wage. Congressional staff economists are urging legislators to consider adopting an earned-income tax credit instead. Suppose neither workers nor employers would support that proposal unless the expected value of each party's economic surplus would be at least as great as under the minimum wage. a. In the graph below, use the point tool provided 'Wmin' to indicate the wage and employment combination that would result in a $12 per-hour minimum wage. W ($/hour) 24 20 16 12 8 0 Labor Market D L (person-hours/day) S 4,000 8,000 12,000 16,000 20,000 24,000 Tools Wmin b. Calculate the amounts by which employer surplus and worker surplus change as a result of the minimum wage. Employer surplus would be (Click to select) by $ per day. Worker surplus would be (Click to select) by $ per day. c. Which of the following describes both an earned-income tax credit and a tax that would raise enough money to pay for it that would receive unanimous support from both workers and employers? A tax of $14,000 levied on employers used to fund an earned-income tax credit of $1.80 per hour. A tax of $12,000 levied on employers used to fund an earned-income tax credit of $1.20 per hour. A tax of $20,000 levied on employers used to fund an earned-income tax credit of $2.00 per hour. A tax of $16,000 levied on employers used to fund an earned-income tax credit of $1.60 per hour.
Chapter16: Labor Markets
Section: Chapter Questions
Problem 16.4P
Related questions
Question
Transcribed Image Text:Suppose the demand and supply curves for unskilled labor in the labor market are as shown in the following figure.
Congress is about to enact a $12 per-hour minimum wage. Congressional staff economists are urging legislators to
consider adopting an earned-income tax credit instead. Suppose neither workers nor employers would support that
proposal unless the expected value of each party's economic surplus would be at least as great as under the minimum
wage.
a. In the graph below, use the point tool provided 'Wmin' to indicate the wage and employment combination that would
result in a $12 per-hour minimum wage.
W ($/hour)
24
20
16
12
8
4
0
Labor Market
D
L (person-hours/day)
S
4,000 8,000 12,000 16,000 20,000 24,000
Tools
9
Wmin
b. Calculate the amounts by which employer surplus and worker surplus change as a result of the minimum wage.
Employer surplus would be (Click to select) by $
per day.
Worker surplus would be (Click to select) by $
per day.
c. Which of the following describes both an earned-income tax credit and a tax that would raise enough money to pay
for it that would receive unanimous support from both workers and employers?
A tax of $14,000 levied on employers used to fund an earned-income tax credit of $1.80 per hour.
A tax of $12,000 levied on employers used to fund an earned-income tax credit of $1.20 per hour.
A tax of $20,000 levied on employers used to fund an earned-income tax credit of $2.00 per hour.
A tax of $16,000 levied on employers used to fund an earned-income tax credit of $1.60 per hour.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Macroeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506756
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning