Homework (Ch 06) Attempts: 25 6. Who should pay the tax? The tollowing graph sho

Question

Homework (Ch 06) Attempts: 25 6. Who should pay the tax? The tollowing graph shows the labor market for research assistants in the fictional country of Collegia. The equitoriom wage is $10 per hour, and the verage: 2.5/5 equilibrium number of research assistants is 150. Suppose the govenment has decided to institute a $2-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). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Empioyers field finitally sct at zoro dalars per hour) shifts the demand curve down by the amount you anter, and entering a umber into the Tax Levied on Workers field (intually set at zero dofar per hour) shits the supply curve up by the amount you enter To determine the before-tax wage for each tax proposal, adjust the amount in tha Wage feld unbl the quantity of labor supplied squals the quantity of labor demanded. You wil not be graded an any changes you make to theg araph Note: Once you enter a value in a white field, the oraph and any corresponding amounts in each grey field will change accordingly Graph Input Tool Market for Research Assistants 18 Dalars per hour) Sup Labor Demanded sumber 186 Labor Supplied 16 workers) O Type here to search

Explanation / Answer

Ans:

Equilibrium wage = $10 per hour

Equilibrium quantity = 150 workers

1) Table showing tax proposal and quantity hired

2) The proposal in which tax is collected from each side evenly.

when tax is collected from each side evenly, the number of research assistants hired is higher.Hence the government goal can be accomplished when tax is collected from each side evenly.

Tax levied on employers Tax levied on workers Quantity hired After tax wage paid by employers After tax wage received by workers $2 0 130 $12 $10 0 $2 130 $10 $8 $1 $1 135 $11 $9

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