The following graph shows the labor market for research assistants in the fictional country of Universalia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 200. Suppose the government has decided to institute a $2-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 fleld (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 fileld (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 fleld 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 20 Market for Research Assistants 16 IWage (Dolars per hour) 16 Supply Labor Demanded (Number of workers) Labor Supplied (Number of workers) 14 400 12 10 Demand Shifter Supply Shifter Demand Tax Levied on Employers (Doltars per hour) Tax Levied on Workers (Dollars per hour) 0.00 3. D- Tax 360 400 WAGE (Dolars per hour)
The following graph shows the labor market for research assistants in the fictional country of Universalia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 200. Suppose the government has decided to institute a $2-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 fleld (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 fileld (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 fleld 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 20 Market for Research Assistants 16 IWage (Dolars per hour) 16 Supply Labor Demanded (Number of workers) Labor Supplied (Number of workers) 14 400 12 10 Demand Shifter Supply Shifter Demand Tax Levied on Employers (Doltars per hour) Tax Levied on Workers (Dollars per hour) 0.00 3. D- Tax 360 400 WAGE (Dolars per hour)
Chapter29: Resource Markets
Section: Chapter Questions
Problem 15E
Related questions
Question
7
Transcribed Image Text:For each of the proposals, use the previous graph to determine the new number of research assistants hired. Then compute the after-tax amount
paid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by research
assistants (that is, the wage recelved by workers minus any taxes collected from the workers).
After-Tax Wage Received by
After-Tax Wage Paid by
Employers
Tax Proposal
Quantity Hired
Workers
Levied on
Levied on
(Number of
(Dollars per hour)
(Dollars per hour)
Employers
Workers
workers)
(Dollars per hour)
(Dollars per
hour)
2.
400
10
8.
2
400
10
400
10
Suppose the government doesn't want to discourage employers from hiring research assistants and, therefore wants to minimize the share of the tax
paid by the employers. or the three tax proposals, which is best for accomplishing this goal?
O The proposal in which the entire tax is collected from workers
O The proposal in which the tax is collected from each side evenly
The proposal in which the tax is collected from employers
None of the proposals is better than the others
Transcribed Image Text:6. Who should pay the tax?
The following graph shows the labor market for research assistants in the fictional country of Universalia. The equilibrium wage is $10 per hour, and
the equilibrium number of research assistants is 200.
Suppose the government has decided to institute a $2-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
20
Market for Research Assistants
16
IWage
(Dolars per hour)
4
16
Supply
Labor Demanded
(Number of workers)
Labor Supplied
(Number of workers)
14
400
12
Demand Shifter
Supply
10
Demand
Tax Levied on
Employers
(Doitars per hour)
Tax Levied on
Workers
(Dollars per hour)
0.00
D- Tax
+.
40 80 120 160 200 240 280 320 360 400
WAGE (Dollars per hour)
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