6. Who should pay the tax?The following graph gives the labor market for laboratory aides in the imaginary country of Paideia. The equilibrium hourly wage is $10, and theequilibrium number of laboratory aides is 250.Suppose the federal government of Paidela has decided to institute an hourly payroll tax of $4 on laboratory aldes and wants to determine whether thetax should be levied on the workers, the employers, or both (in such a way that half the tax is collected from each party).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 perhour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers field (initially set at zer dollarsper 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 theWage 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.WAGE (Dallars per hour22:22.10SupplyDerrand50 100 150 200 250 300 350 400 450 800LABOR (Number of workers)Graph Input ToolMarket for Laboratory AidesWage(Dollars per hour)Labor Demanded(Number of workers)Demand ShifterTax Levied onEmployers(Dollars per hour)46250Labor Supplied(Number of workers,Supply ShifterTax Levied onWorkers(Dollars per hour) For each of the proposals, use the previous graph to determine the new number of laboratory aides hired. Then compute the after-tax amount paidby employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by laboratory aides(that is, the wage received by workers minus any taxes collected from the workers).Tax ProposalLevied onEmployers(Dollars per hour)02Levied onWorkers(Dollars perhour)042Quantity Hired(Number ofworkers)After-Tax Wage Paid byEmployers(Dollars per hour)O The proposal in which the entire tax is collected from workersThe proposal in which the tax is collected from each side evenlyThe proposal in which the tax is collected from employersO None of the proposals is better than the othersAfter-Tax Wage Received byWorkers(Dollars per hour)Suppose the government is concerned that laboratory aides already make too little money and, therefore, wants to minimize the share of the tax paidby employees. Of the three tax proposals, which is best for accomplishing this goal?

For each of the proposals, use the previous graph to determine the new number of laboratory aides 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 laboratory aides (that is, the wage received by workers minus any taxes collected from the workers). Tax Proposal Levied on Employers (Dollars per hour) 0 Levied on Workers (Dollars per hour) 0 4 2 Quantity Hired (Number of workers) After-Tax Wage Paid by Employers (Dollars per hour) The proposal in which the entire tax is collected from workers 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 After-Tax Wage Received by Workers (Dollars per hour) Suppose the government is concerned that laboratory aides 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?

For each of the proposals, use the previous graph to determine the new number of laboratory aides 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 laboratory aides (that is, the wage received by workers minus any taxes collected from the workers). Tax Proposal Levied on Employers (Dollars per hour) 0 Levied on Workers (Dollars per hour) 0 4 2 Quantity Hired (Number of workers) After-Tax Wage Paid by Employers (Dollars per hour) The proposal in which the entire tax is collected from workers 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 After-Tax Wage Received by Workers (Dollars per hour) Suppose the government is concerned that laboratory aides 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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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