Principles of Macroeconomics Plus MyLab Economics with Pearson eText (1-semester access) -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134424026
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 17, Problem 3.4P
To determine
The elasticity of supply of labor.
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In the United States, payroll taxes are essentially assessed evenly between workers and firms.
If the supply of labor is less elastic than the demand for labor, 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?
The Laffer curve suggests
A.there is some maximum amount of tax revenue that the government can collect from taxing income.
B.the optimal tax rate leads to the highest amount of tax revenue.
C.the optimal tax rate on labor income is 0%
D.an increase in tax rates leads to an increase in labor supply.
Which of the following statements is correct?
A decrease in the size of a tax always decreases the tax revenue raised by that tax.
A decrease in the size of a tax always decreases the deadweight loss of that tax.
Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.
An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.
Chapter 17 Solutions
Principles of Macroeconomics Plus MyLab Economics with Pearson eText (1-semester access) -- Access Card Package (12th Edition)
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