MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Question
Chapter 18, Problem 13QE
(a)
To determine
The impact of change marginal tax rate on incentives to work.
(b)
To determine
Check whether the system is fairer than the current system or not.
(c)
To determine
Impact of introducing regressive tax in hours.
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Consider an economy with two types of workers - less productive and more
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What is the potential impact of income taxes on labor (consider the income effect and substitution effect)? Do you think it would be better to have a proportional income tax (flat tax) or progressive income tax? Explain.
The Earned Income Tax Credit (EITC) is a way of subsidizing those who are unable to work and have no earnings. true or false?
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b. false
Chapter 18 Solutions
MICROECONOMICS
Ch. 18.1 - Prob. 1QCh. 18.1 - Prob. 2QCh. 18.1 - Prob. 3QCh. 18.1 - Prob. 4QCh. 18.1 - Prob. 5QCh. 18.1 - Prob. 6QCh. 18.1 - Prob. 7QCh. 18.1 - Prob. 8QCh. 18.1 - Prob. 9QCh. 18.1 - Prob. 10Q
Ch. 18 - Prob. 1QECh. 18 - Prob. 2QECh. 18 - Prob. 3QECh. 18 - Prob. 4QECh. 18 - Prob. 5QECh. 18 - Prob. 6QECh. 18 - Prob. 7QECh. 18 - Prob. 8QECh. 18 - Prob. 9QECh. 18 - Prob. 10QECh. 18 - Prob. 11QECh. 18 - Prob. 12QECh. 18 - Prob. 13QECh. 18 - Prob. 1QAPCh. 18 - Prob. 2QAPCh. 18 - Prob. 3QAPCh. 18 - Prob. 4QAPCh. 18 - Prob. 5QAPCh. 18 - Prob. 1IPCh. 18 - Prob. 2IPCh. 18 - Prob. 3IPCh. 18 - Prob. 4IPCh. 18 - Prob. 5IPCh. 18 - Prob. 6IPCh. 18 - Prob. 7IPCh. 18 - Prob. 8IPCh. 18 - Prob. 9IP
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- Explain how you would create a government program that would give an incentive for labor to increase hours and keep labor from falling into the poverty trap.arrow_forwardThe income effect on labor supply is likely to be a. small because most people don't have the ability to change labor supply on the intensive margin b. large because most people can change labor supply on the intensive margin c. large because tax changes create significant labor supply changes at both the intensive and the extensive margin d. small because regulations prevent people from entering the labor forcearrow_forwardIn New York workers face a state income tax rate of about 6.5%. In addition, workers who reside in New York City also face a city income tax of 3.5%. 1. In the long run, for which tax do workers bear a larger share of the incidence? Explain. 2. How would your answer to part (1) change if the city tax were temporary (lasting just a year). Explain. 3. IHow would your answers to parts (1) and (2) change if the city tax were on those who earned their money in New York City, and did not depend on city of residence?arrow_forward
- Assume that workers whose are less than $8000 currently pay no federal income taxes. Suppose a new government program guarantees each worker $4000, whether or not he or she earns any income. For all earned income up to $8000, the worker must pay a 50- percent tax. How is the program likely to affect the labor supply curve of workers? For workers whose wages such that their pre-tax earned incomes are less than $8000, labor supply will be.. a. zero because there will be no incentive to work b. zero because there will be a negative income effect (in terms of work hours) c. zero because after-tax wages will be higher d. positive because after-tax wages will be higher e. positive because there will be a positive substitution effect (in terms of work hours)arrow_forwardAccording to theory, do firms or workers bear the cost of mandated benefits funded by payroll taxes? Explain with a graph depicting labor supply and demand.arrow_forwardReferred to the above graph of the labor market. The government decides to impose a wage tax as shown on the graph. If the number of workers hired after the imposition of the tax is 800 then the total amount of tax is $___arrow_forward
- Explain all right as well as wrong options In 1986 Congress drastically cut the marginal tax rate on upper income levels from 50% to 28%. Empirical evidence analyzing the labor supply effects of the tax cut found that women in the high income tax bracket Select one: A. reduced their labor force participation and hours worked significantly because of a dominant income effect. B. increased both labor force participation and hours of work significantly. C. experienced offsetting substitution and income effects. D. did not respond in any significant way to the tax cut, as their high level of income ensured that they were already content with their labor supply choices.arrow_forwardHello! I just wanted to ask if change of minimum wage is elastic or inelastic? Thanks!arrow_forwardWhat do you think would happen if there were no taxes and you could spend all your money on capital and employee wages?arrow_forward
- 6arrow_forwardA worker earns $10 per hour at his job each week. Now suppose this worker is eligible for a 20 percent wage subsidy (EITC) on his hourly wage rate. Now do the following - a. Estimate this worker's post-subsidy wage rate. a. If this worker was already in the labor market, what work incentives does the policy of subsidy impose on his labor supply. a. In general, what is the difference between the work incentives of a wage subsidy versus a plain cash grant? wagearrow_forwardMany economists believe that a more effective way to supplement the income of the poor is through a negative income tax. Under this scheme, everyone reports his or her income to the government; individuals and families earning a higher income will pay a tax based on that income, while low-income individuals and families receive a subsidy, or negative tax. Assume that the only qualification required to receive a tax credit is low income.arrow_forward
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