Suppose the demand and supply curves for unskilled labor in the labor market are as shown in the following figure. Congress is about to enact a $12 per-hour minimum wage. Congressional staff economists are urging legislators to consider adopting an earned-income tax credit instead. Suppose neither workers nor employers would support that proposal unless the expected value of each party's economic surplus would be at least as great as under the minimum wage. a. In the graph below, use the point tool provided 'Wmin' to indicate the wage and employment combination that would result in a $12 per-hour minimum wage. W ($/hour) 24 20 16 12 8 0 Labor Market D L (person-hours/day) S 4,000 8,000 12,000 16,000 20,000 24,000 Tools Wmin b. Calculate the amounts by which employer surplus and worker surplus change as a result of the minimum wage. Employer surplus would be (Click to select) by $ per day. Worker surplus would be (Click to select) by $ per day. c. Which of the following describes both an earned-income tax credit and a tax that would raise enough money to pay for it that would receive unanimous support from both workers and employers? A tax of $14,000 levied on employers used to fund an earned-income tax credit of $1.80 per hour. A tax of $12,000 levied on employers used to fund an earned-income tax credit of $1.20 per hour. A tax of $20,000 levied on employers used to fund an earned-income tax credit of $2.00 per hour. A tax of $16,000 levied on employers used to fund an earned-income tax credit of $1.60 per hour.
Suppose the demand and supply curves for unskilled labor in the labor market are as shown in the following figure. Congress is about to enact a $12 per-hour minimum wage. Congressional staff economists are urging legislators to consider adopting an earned-income tax credit instead. Suppose neither workers nor employers would support that proposal unless the expected value of each party's economic surplus would be at least as great as under the minimum wage. a. In the graph below, use the point tool provided 'Wmin' to indicate the wage and employment combination that would result in a $12 per-hour minimum wage. W ($/hour) 24 20 16 12 8 0 Labor Market D L (person-hours/day) S 4,000 8,000 12,000 16,000 20,000 24,000 Tools Wmin b. Calculate the amounts by which employer surplus and worker surplus change as a result of the minimum wage. Employer surplus would be (Click to select) by $ per day. Worker surplus would be (Click to select) by $ per day. c. Which of the following describes both an earned-income tax credit and a tax that would raise enough money to pay for it that would receive unanimous support from both workers and employers? A tax of $14,000 levied on employers used to fund an earned-income tax credit of $1.80 per hour. A tax of $12,000 levied on employers used to fund an earned-income tax credit of $1.20 per hour. A tax of $20,000 levied on employers used to fund an earned-income tax credit of $2.00 per hour. A tax of $16,000 levied on employers used to fund an earned-income tax credit of $1.60 per hour.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose the demand and supply curves for unskilled labor in the labor market are as shown in the following figure.
Congress is about to enact a $12 per-hour minimum wage. Congressional staff economists are urging legislators to
consider adopting an earned-income tax credit instead. Suppose neither workers nor employers would support that
proposal unless the expected value of each party's economic surplus would be at least as great as under the minimum
wage.
a. In the graph below, use the point tool provided 'Wmin' to indicate the wage and employment combination that would
result in a $12 per-hour minimum wage.
W ($/hour)
24
20
16
12
8
4
0
Labor Market
D
L (person-hours/day)
S
4,000 8,000 12,000 16,000 20,000 24,000
Tools
9
Wmin
b. Calculate the amounts by which employer surplus and worker surplus change as a result of the minimum wage.
Employer surplus would be (Click to select) by $
per day.
Worker surplus would be (Click to select) by $
per day.
c. Which of the following describes both an earned-income tax credit and a tax that would raise enough money to pay
for it that would receive unanimous support from both workers and employers?
A tax of $14,000 levied on employers used to fund an earned-income tax credit of $1.80 per hour.
A tax of $12,000 levied on employers used to fund an earned-income tax credit of $1.20 per hour.
A tax of $20,000 levied on employers used to fund an earned-income tax credit of $2.00 per hour.
A tax of $16,000 levied on employers used to fund an earned-income tax credit of $1.60 per hour.
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