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 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). For each of the proposals, use the previous graph to determine the new number of research assistants hired. Then compute the after-tax amountpaid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by researchassistants (that is, the wage received by workers minus any taxes collected from the workers).After-Tax Wage Paid byAfter-Tax Wage Received byТаx ProposalQuantity HiredEmployersWorkersLevied onLevied on(Number of(Dollars per hour)(Dollars per hour)EmployersWorkersworkers)(Dollars per hour)(Dollars perhour)442Suppose the government is concerned that research assistants already make too little money and, therefore, wants to minimize the share of the taxpaid by employees. Of the three tax proposals, which is best for accomplishing this goal?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 employersNone of the proposals is better than the others Graph Input ToolMarket for Research Assistants2018I Wage(Dollars per hour)416Labor Supplied(Number of workers)SupplyLabor Demanded62514(Number of workers)12Demand ShifterSupply Shifter108DemandTax Levied onWorkers(Dollars per hour)Tax Levied onEmployers(Dollars per hour)4250100 150 200 250 300 350 400 450 500LABOR (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 amountpaid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by researchassistants (that is, the wage received by workers minus any taxes collected from the workers).After-Tax Wage Paid byAfter-Tax Wage Received byTax ProposalQuantity HiredEmployersWorkersLevied onLevied on(Number of(Dollars per hour)(Dollars per hour)EmployersWorkersworkers)(Dollars per hour)(Dollars perWAGE (Dollars per hour)

Tax refers to the involuntary fees levied on individuals or corporations and enforced by the…

Answered: For each of the proposals, use the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 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).

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).
After-Tax Wage Paid by
After-Tax Wage Received by
Таx Proposal
Quantity Hired
Employers
Workers
Levied on
Levied on
(Number of
(Dollars per hour)
(Dollars per hour)
Employers
Workers
workers)
(Dollars per hour)
(Dollars per
hour)
4
4
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?
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
I Wage
(Dollars per hour)
4
16
Labor Supplied
(Number of workers)
Supply
Labor Demanded
625
14
(Number of workers)
12
Demand Shifter
Supply Shifter
10
8
Demand
Tax Levied on
Workers
(Dollars per hour)
Tax Levied on
Employers
(Dollars per hour)
4
2
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).
After-Tax Wage Paid by
After-Tax Wage Received by
Tax Proposal
Quantity Hired
Employers
Workers
Levied on
Levied on
(Number of
(Dollars per hour)
(Dollars per hour)
Employers
Workers
workers)
(Dollars per hour)
(Dollars per
WAGE (Dollars per hour)

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