Graph Input Tool Market for Research Assistants 20 18 Sup ply IWage (Dolars per hour) 16 Labor Demanded (Number of workers) Labor Supplied (Number of workers) 310 190 14 12 10 Demand Shifter Supply Shifter Tax Levied on ber and Employers (Doliars per hour) Tax Levied on Workers (Dollars per hour) O so 100 150 200 250 300 350 400 450 s00 LABOR (Number of workers) 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 received by workers minus any taxes collected from the workers). After-Tax Wage Received by After-Tax Wage Paid by Employers Тах 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) 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. Of 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 O None of the proposals is better than the others WAGE (Dollars per hour)

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter14: Labor Markets And Income

Section: Chapter Questions

Problem 2SCQ: Table 14.11 shows levels of employment (Labor), the marginal product at each of those levels, and a...

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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 250.

Suppose the government has decided to institute a $4-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
Market for Research Assistants
20
18
I Wage
(Dollars per hour)
4
Supply
16
Labor Demanded
(Number of workers)
Labor Supplied
(Number of workers)
310
190
14
12
Demand Shifter
Supply Shifter
10
Tax Levied on
Workers
(Dollars per hour)
Tax Levied on
ben and
Employers
(Dollars per hour)
4
2
50 100 150 200 250 300 350 400 450 500
LABOR (Number of workers)
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 received by workers minus any taxes collected from the workers).
After-Tax Wage Paid by
After-Tax Wage Received by
Таx Proposal
Quantity Hired
Employers
Workers
Levied on
Levied on
(Number of
(Dollars per hour)
(Dollars per hour)
Employers
Workers
workers)
(Dollars per hour)
(Dollars per
hour)
4
2
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. Of the three tax proposals, which is best for accomplishing this goal?
The proposal in which the entire tax is collected from workers
The proposal in which the tax is collected from each side evenly
O The proposal in which the tax is collected from employers
O None of the proposals is better than the others
WAGE (Dollars per hour)

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