assistants in the fictional country of Academia. 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.
- The Following Graph Shows The Labor Market For Research Assistants In The Fictional Country Of Academia The Equilibrium 1 (78.03 KiB) Viewed 39 times
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
The proposal in which the tax is collected from employers
None of the proposals is better than the others
Graph Input Tool ? Market for Research Assistants 20 18 Supply 16 Wage (Dollars per hour) Labor Demanded (Number of workers) 310 Labor Supplied (Number of workers) 190 14 12 WAGE (Dollars per hour) Demand Shifter 10 Supply Shifter 8 0 0 Demand Tax Levied on Employers (Dollars per hour) Tax Levied on Workers (Dollars per hour) 6 4 1 2 1 0 0 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). Quantity Hired (Number of workers) After-Tax Wage Paid by Employers (Dollars per hour) After-Tax Wage Received by Workers (Dollars per hour) Tax Proposal Levied on Levied on Employers Workers (Dollars per hour) (Dollars per hour) 4 0 0 4 ill 100 le 2 2 2