6. Who should pay the tax? The following graph shows the labor market for research assistants in the fictional country o

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6 Who Should Pay The Tax The Following Graph Shows The Labor Market For Research Assistants In The Fictional Country O 1 (37.11 KiB) Viewed 15 times

6 Who Should Pay The Tax The Following Graph Shows The Labor Market For Research Assistants In The Fictional Country O 2 (31.65 KiB) Viewed 15 times

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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 Collegia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 250. Suppose the government has decided to institute a 14-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 zere 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 dollers 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 4 Wage (Dollars per hour) Labor Demanded 625 Labor Suppled Supply herf we Number of werkend H REET S OLD A-Z M 3 1:33 PM 980 5/20/2922 M ♡
MULA Wage field until the quantity of labor supplied equals the quantity of laber 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 wil change accordingly Graph Input Tool Market for Research Assistants Wage (Dollars per hour) 4 Supply Labor Demanded Number of worken) 625 Labor Suppled (Number a worken) Demand Shifter Supply Shifter Derand Tax Levied on Employers (Dolors per hour) Tax Levied on 1 Workers (Dollars per hour) 0 100 150 200 250 300 350 400 450 500 LABOR (Number of workers) AFF Raincoming WAGE (Dolars per hour OL 1 Ⓡ 0 0 A-Z 90 N m +POTO <D 134 PM 5/28/2012
Homework (Ch 06) 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 taves collected from the workers) Tax Proposal After-Tax Wage Paid by Employers (Dollars per hour) After-Tax Wage Received by Workers Quantity Hired (Dollars per hour) Levied on Employers Levied on Workers (Number of workers) (Dollars per hour) (Dollars per hour) 0 0 2 Suppose the government is concerned that research assistants already make too little money and, therefore, wants to minimize the share of the tax paid by employees. 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 O The proposal in which the tax is collected from employers O None of the proposals is better than the others 0 8 D SEO NZ D POT.+ -> @@ < 134 PM 1/28/2002 O