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Why do experts disagree about whether labor taxeshave small or large deadweight losses?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 4QR

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Why do experts disagree about whether labor taxes
have small or large deadweight losses?

Definition Definition Cost to society created by market inefficiency when supply and demand are not in market equilibrium.

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Why do labor experts disagree about whether labor taxes have small or large deadweight losses? Given your knowledge of economics and experience to date, what is your view on the issue? Explain your reasoning.
Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about the size of labor taxes. the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states. the elasticity of labor demand. the elasticity of labor supply.
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Suppose demand for good X is given by QD = 900- p/2 where p is the price and QD the quantity demanded. Supply is given by QS = p/4.Suppose 60 TL tax is imposed on each unit of X that is purchased.What is the burden of the tax? Explain the key factors that determine the incidence of the tax.
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