ECO 2302 PRIN MACO W/MYECO ACC >IP<
4th Edition
ISBN: 9781323504161
Author: CASE
Publisher: PEARSON C
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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
ECO 2302 PRIN MACO W/MYECO ACC >IP<
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- Most economists have reached the following conclusion about supply-side economics.a. None of these.b. Supply-side tax cuts are likely to reduce income inequality.c. Supply-side tax cuts are almost certain to lead to smaller budget deficits. d. Supply-side tax cuts are likely to widen income inequality. Give explanation for answerarrow_forwardPlease write down whether the following statements are true or false, and explain your answer very briefly. If prices are constant economic incidence would be the more than legislative (statutory) incidence. Regarding incidence analysis, if we examine distributional changes which result if one tax is substituted for another while holding total expenditure and tax revenue as constant, then we use budget incidence. If the individual works more after the tax on labour, that means substitution effect outweighs the income effect. Supply side economists are for increasing the tax rates. As a result of increase in the tax rate, both excess burden and taxrevenue increase. 4 A progressive tax system encourages individuals to work harder. The more elastic is demand is relative to supply, the greater the portion of burden is borne by consumers.arrow_forwardIdentify the effect of increase in tax rates on either demand or supply curve and the equilibruim interst rates.arrow_forward
- Given the following information: QD = 240 – 5P QS = P Where QD is the quantity demanded, Qs is the quantity supplied and P is the price Equilibrium price before the tax = Given the following information: QD = 240 – 5P QS = P Where QD is the quantity demanded, Qs is the quantity supplied and P is the price Equilibrium price before the tax =arrow_forwardAssume that the demand for coal is more elastic than the supply. A tax on coal will a. increase the price of coal paid by buyers, and sellers bear a smaller burden of the tax b. decrease the price of coal that sellers really get, and sellers have to bear a bigger burden of the tax c. decrease the price of coal paid by buyers, and buyers have to bear a bigger burden of the tax d. increase the price of coal that sellers really get, and buyers bear a smaller burden of the taxarrow_forwardMost economists have reached the following conclusion about supply-side economics. a. Supply-side tax cuts are likely to reduce income inequality. b. Supply-side tax cuts are almost certain to lead to smaller budget deficits. c. Supply-side tax cuts are likely to widen income inequality. d. None of these.arrow_forward
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