EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Question
Chapter 13A.2, Problem 1MQ
To determine
To analyze the way a lump-sum tax of a fixed-dollar amount and a proportional tax affect the labor supply of an individual.
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Explain all right as well as wrong options
In 1986 Congress drastically cut the marginal tax rate on upper income levels from 50% to 28%. Empirical evidence analyzing the labor supply effects of the tax cut found that women in the high income tax bracket
Select one:
A.
reduced their labor force participation and hours worked significantly because of a dominant income effect.
B.
increased both labor force participation and hours of work significantly.
C.
experienced offsetting substitution and income effects.
D.
did not respond in any significant way to the tax cut, as their high level of income ensured that they were already content with their labor supply choices.
A tax on labour income that does not eventually affect the number of labour hours supplied is non-distortionary. Do you agree or disagree with this statement. Explain
In which case is the total amount of a payroll tax paid by employees through lower wages?
Group of answer choices
When the labor supply curve is horizontal.
When the labor supply curve is vertical..
When the labor demand curve is vertical.
When the labor supply curve is downward sloping at a 45-degree angle.
When unemployment is widespread and the wage is above its market clearing level, a cut in employer payroll tax will
Group of answer choices
drive up wages but have little to no effect on employment and unemployment.
increase employment, reduce unemployment, and have little effect on wages.
be largely ineffective.
benefit employers and have no effect on workers.
Chapter 13A Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
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- If labor supply is perfectly inelastic, the imposing a payroll tax that will be split between employers and employees will a) reduce employment. b) leave employment levels unchanged. c) cause the tax burden to fall exclusively on firms. d) cause the tax burden to fall exclusively on workers.arrow_forwardIllustrate with a clear diagram and carefully explain the impact of an increase in the income tax rate from 25 percent to 35 percent on the demand for labour, supply of labour, equilibrium wage and level of employment.arrow_forwardSuppose that the government introduces a welfare program in which any individual with an income of less than $42,350 per year receives a lump-sum transfer payment of $2,000 from the government. Assume that, in the short run, there is no change in labor-supply behavior among the people in Perkopia. In the year 2007, the poverty rate after the introduction of the welfare program in Perkopia isarrow_forward
- Consider a perfectly competitive labor market with a very inelastic supply of labor. If a payroll tax is implemented, who would bear a larger portion of the tax burden? a.Mostly by the employer. b.Mostly by the employee. c.Split fairly evenly between the employer and the employee.arrow_forwardWhat is the potential impact of income taxes on labor (consider the income effect and substitution effect)? Do you think it would be better to have a proportional income tax (flat tax) or progressive income tax? Explain.arrow_forwardIn the United States, labor supply tends to be inelastic relative to labor demand, and according to law, payroll taxes are essentially assessed evenly between workers and firms. Given the above situation, are workers or firms more likely to bear the additional burden of an increased payroll tax in the United States? Could this burden be shifted to the firms by assessing the increase in payroll taxes on just firms rather than having firms and workers continue to be assessed payroll taxes equally?arrow_forward
- What impact does taxes have on the state of employment and the workforce? Are they beneficial or a hindrance to growth in employment? If taxes were lower, how could business differently? What do you think would happen if there were no taxes and one could spend all the money earned on capital and employee wages?arrow_forwardThe government raises the income tax. What is the effect on the supply of labor, the demand for labor, equilibrium employment, the real wage rate, and potential GDP? The supply of labor _______ and the demand for labor _______. A. does not change; decreases B. decreases; does not change C. decreases; increases D. decreases; decreasesarrow_forwardLaura earns a base salary of $50,000 as an event planner and is subject to the following hypothetical income ta is considering taking on an additional wedding that will increase her income by $5,000. In order for Laura to c worth her time, it must earn her $3,000 after taxes. Please round all answers to two decimal places. What is the marginal tax rate associated with taking on this wedding? Marginal tax rate: Income $0-$10,000 $10,001-$30,000 $30,001-$50,000 $50,001+ Average tax rate: 4 What is Laura's average tax rate if the extra wedding is accepted? ves R Given the information, will Laura undertake this extra wedding? 5 7 Tax rate 5% 10% 20% 50% B T 6 % 45 % 8 9arrow_forward
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