Consider a government which collects tax on wages received by workers to provide public goods. This tax creates a wedge/difference between the wages paid by the firms and wages received by the workers. The tax revenue is equal to the product of tax rate and quantity of workers hired. There is no corruption or political pressure on how much of the public good the government produces. Suppose the labour demand equation is given by w = 400-2L and the labour supply curve is fixed at 190 units. If the tax rate is $20 per unit, calculate the tax revenue to be collected by the government. How many workers are hired before and after tax is imposed? Show your steps.
Consider a government which collects tax on wages received by workers to provide public goods. This tax creates a wedge/difference between the wages paid by the firms and wages received by the workers. The tax revenue is equal to the product of tax rate and quantity of workers hired. There is no corruption or political pressure on how much of the public good the government produces. Suppose the labour demand equation is given by w = 400-2L and the labour supply curve is fixed at 190 units. If the tax rate is $20 per unit, calculate the tax revenue to be collected by the government. How many workers are hired before and after tax is imposed? Show your steps.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider a government which collects tax on wages received by workers to provide public goods. This tax creates a wedge/difference between the wages paid by the firms and wages received by the workers. The tax revenue is equal to the product of tax rate and quantity of workers hired. There is no corruption or political pressure on how much of the public good the government produces.
Suppose the labour demand equation is given by w = 400-2L and the labour supply curve is fixed at 190 units. If the tax rate is $20 per unit, calculate the tax revenue to be collected by the government. How many workers are hired before and after tax is imposed? Show your steps.
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