The following graph shows the labor market for research assistants in the fictional country of Academia. The equilibrium wage is $10 per hour, and theequilibrium 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 shouldbe 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 perhour) 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 dollarsper 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 theWage 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.Graph Input ToolMarket for Research Assistants2018I Wage(Dollars per hour)416Labor DemandedLabor Supplied(Number of workers)Supply25014(Number of workers)12Demand ShifterSupply Shifter10DemandTax Levied onEmployers(Dollars per hour)Tax Levied onWorkers(Dollars per hour)20406080 100 120 140 160 180 200LABOR (Number of workers)WAGE (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 amountpaid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by researchassistants (that is, the wage received by workers minus any taxes collected from the workers).After-Tax Wage Paid byAfter-Tax Wage Received byTax ProposalQuantity HiredEmployersWorkersLevied onLevied on(Number of(Dollars per hour)(Dollars per hour)EmployersWorkersworkers)(Dollars per hour)(Dollars perhour)4422Suppose the government is concerned that research assistants already make too little money and, therefore, wants to minimize the share of the taxpaid by employees. Of the three tax proposals, which is best for accomplishing this goal?The proposal in which the entire tax is collected from workersThe proposal in which the tax is collected from each side evenlyThe proposal in which the tax is collected from employersNone of the proposals is better than the others

Levied on Employers Levied on Workers Quantity hired After tax wage paid by employers After tax…

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 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. Graph Input Tool Market for Research Assistants 20 18 I Wage (Dollars per hour) 16 Supply Labor Demanded (Number of workers) Labor Supplied (Number of workers) 250 14 12 Demand Shifter Supply Shifter 10 Dem and Tax Levied on Employers (Dollars per hour) Tax Levied Workers (Dollars per hour) O 20 40 60 80 100 120 140 160 180 200 LABOR (Number of workers) WAGE (Dollars per hour)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter12: The Supply Of And Demand For Productive Resources

Section: Chapter Questions

Problem 7CQ