ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Consider the labor market. Suppose that the supply of labor is = 2 + H/2 and the
Now suppose that the government levies a $5 per hour payroll tax on buyers of labor (firms).
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Determine the worker (supplier) and firm (buyer) tax burdens.
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Determine the
deadweight loss associated with this payroll tax.
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- Suppose a tax on wages is passed to finance a government program. The legislation orders a tax of 12.4% on per hour wage earnings with 6.2% to be paid by employers and 6.2% to be paid by workers. Assume labor supply is more inelastic than labor demand. Under these assumptions, describe the economic burden of the tax? a.The economic burden will be fully on workers. b. The economic burden will be fully on employers. c. The economic burden will be distributed in equal amounts to workers and employers. d. The economic burden will be mostly on workers and less on employers.arrow_forwardThe figure below displays a market for teenage labor with a minimum wage of $6 per hour How many workers are unemployed at the $6 minimum wage? LS-LD. 30 (=70-40) The government places an hourly tax of $1 per worker on employers. Show the effect of the tax on the demand for labor. With both minimum wage and the labor tax, how many workers do firm employ? What is the incremental effect of the tax on employment? With both minimum wage and the labor tax, how many workers are unemployed? What is the incremental effect of the tax on unemployment?arrow_forwardIf labor supply is perfectly inelastic, the imposing a payroll tax that will be split between employers and employees will a) reduce employment. b) leave employment levels unchanged. c) cause the tax burden to fall exclusively on firms. d) cause the tax burden to fall exclusively on workers.arrow_forward
- Distinguish carefully between a minimum wage and a wage subsidy as alternative policies to assist low-wage workers. Explain your answer.(needs to be at least 100 words )arrow_forwardThe market wage in industries A and B are $10/hour. The government raises the minimum wage from $8/hour to $12/hour. If the demand for labor is more elastic in industry B than in industry A: a) We would expect decreases in employment in both industries, but the losses will be greater in industry B. b) We would expect a decrease in employment in industry B, but not in industry A. c) We would expect a decrease in employment in industry A, but not in industry B. d) We would expect decreases in employment in both industries, but the losses will be greater in industry Aarrow_forwardPayroll tax imposed Show what happens to worker and producer surplus when a payroll tax is imposed. Show the deadweight loss associated with the payroll tax.arrow_forward
- Describe the impact of the federal government setting the federal minimum wage at a price that is above state minimum wage laws.arrow_forwardAn income Gini coefficient of zero means that everyone earns the same income there is no deadweight loss the market is perfectly competitive there is zero poverty one person earns all the incomearrow_forwardHow would the burden from a payroll tax be shared if the supply of labor was perfectly inelastic? Perfectly elastic?arrow_forward
- If the tax elasticity of labor supply is 0.24, by what percentage will the quantity of labor supplied increase in response to a. a $500 per person income tax rebate?multiple choice A 4.8 percent increase A 1.2 percent increase No increase A 2.4 percent increase b. a 9 percent reduction in marginal tax rates? %arrow_forwardA perfectly competitive market is characterized by the following inverse demand function and inverse supply function where Q is output and P is the price in dollars. Demand: P = 100 – QD Supply: P = 10 + QS Suppose that a price ceiling of $30 is set by the government. Calculate the consumer surplus, the producer surplus, and the deadweight loss as a result of the government price ceilingarrow_forwardConsider the Labor Market in New York and New Jersey. In both markets Demand is given by w = 1000-2E. Assume New York has a perfectly inelastic supply of 400 workers and New Jersey has perfectly inelastic supply of 200 workers. a. Graph the two markets and find the equilibrium wage in each market. b. With costless mobility across markets what would the long-run wage in each market. Show this in your graphs. c. Instead, assume that there are still 400 workers in New York and 200 in New Jersey but now the cost of moving is $ 100. What will be the long-run wage in each market? Explainarrow_forward
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