6. Who should pay the tax? The following graph shows the labor market for research assistants in the fictional country of Academia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 100. 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 Wage (Dollars per hour) 16 Labor Demanded (Number of workers) Labor Supplied (Number of workers) Supply 250 14 12 Demand Shifter Supply Shifter 10 Demand Tax Levied on Employers (Dollars per hour) Tax Levied on Workers (Dollars per hour) O 20 LABOR (Number of workers) 40 60 80 100 120 140 160 180 200 WAGE (Dollars per hour)
6. Who should pay the tax? The following graph shows the labor market for research assistants in the fictional country of Academia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 100. 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 Wage (Dollars per hour) 16 Labor Demanded (Number of workers) Labor Supplied (Number of workers) Supply 250 14 12 Demand Shifter Supply Shifter 10 Demand Tax Levied on Employers (Dollars per hour) Tax Levied on Workers (Dollars per hour) O 20 LABOR (Number of workers) 40 60 80 100 120 140 160 180 200 WAGE (Dollars per hour)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
5.
Transcribed Image Text:6. Who should pay the tax?
The following graph shows the labor market for research assistants in the fictional country of Academia. The equilibrium wage is $10 per hour, and the
equilibrium number of research assistants is 100.
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
Wage
(Dollars per hour)
16
Supply
Labor Demanded
(Number of workers)
Labor Supplied
(Number of workers)
250
14
12
Demand Shifter
Supply Shifter
Demand
Tax Levied on
Employers
(Dollars per hour)
Tax Levied on
Workers
(Dollars per hour)
2
20
40
60
80 100 120 140 160 180 200
LABOR (Number of workers)
WAGE (Dollars per hour)
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