Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
Bartleby Related Questions Icon

Related questions

bartleby

Concept explainers

Question
E2
Consider a person who can work up to 80 hours
each week at a pre-tax wage of $20 per hour
but faces a constant 20% payroll tax. Under
these conditions, the worker maximizes her
utility by choosing to work 50 hours each week.
The government proposes a negative income
tax whereby everyone is given $300 each week
and anyone can supplement her income further
by working. To pay for the negative income tax,
the payroll tax rate will be increased to 50%.
On a single graph, draw the worker's original
budget line and her budget line under the
negative income tax.
page 75Show that the worker will choose to
work fewer hours if the negative income tax is
adopted.
Will the worker's utility be greater under the
negative income tax?
expand button
Transcribed Image Text:Consider a person who can work up to 80 hours each week at a pre-tax wage of $20 per hour but faces a constant 20% payroll tax. Under these conditions, the worker maximizes her utility by choosing to work 50 hours each week. The government proposes a negative income tax whereby everyone is given $300 each week and anyone can supplement her income further by working. To pay for the negative income tax, the payroll tax rate will be increased to 50%. On a single graph, draw the worker's original budget line and her budget line under the negative income tax. page 75Show that the worker will choose to work fewer hours if the negative income tax is adopted. Will the worker's utility be greater under the negative income tax?
Expert Solution
Check Mark
Knowledge Booster
Background pattern image
Economics
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax
Text book image
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Text book image
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Text book image
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Text book image
Microeconomic Theory
Economics
ISBN:9781337517942
Author:NICHOLSON
Publisher:Cengage
Text book image
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,