6. Who should pay the tax? e equilibrium wage is S10 per hour, and The following
ID: 1124400 • Letter: 6
Question
6. Who should pay the tax? e equilibrium wage is S10 per hour, and The following graph shows the labor market ror research assistants in the fictional country of Universalia. the equilibrium number of research assistants is 200. 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 toof to evaluate these three proposals. Entering a number into the Tax Levied on Employers field (iitially set at zero dollars per hour) shits 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) shits 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 equais 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 16 14 12 10H Dolars per hour) Labor Number of workers) Supply 500 Number of workers) Demand Shifter Supply Shifter Tax Levied on Tax Levied on Dallars per hour) (Dollars per 0 40 80 120 160 200 240 280 320 360 400 LABOR (Number of workers)Explanation / Answer
Ans:
Before tax is imposed the equilibrium wage rate is $10 per hour and equilibrium number of research assistants is 200.
1) Table showing tax proposal and quantity of workers hired
2) The proposal in which tax is collected from each side evenly
If the government does not want to discourage employers from hiring research assistants, it should collect tax from each side evenly.This is because when tax of $4 is imposed on the employer, the quantity of workers hired is 0 and when tax of $4 is imposed on the employee, the quantity of workers hired is 0.
Tax levied on employers Tax levied on workers Quantity hired After tax wages paid by employers After tax wages received by workers 4 0 0 $14 $10 0 4 0 $10 $6 2 2 96 $12 $8Related Questions
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