EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 13A.2, Problem 1MQ
To determine
To analyze the way a lump-sum tax of a fixed-dollar amount and a proportional tax affect the labor supply of an individual.
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Chapter 13A Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
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- Suppose you earned $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket which taxes at 10% ranges from zero dollars to $30,000. The second tax bracket which tax at 25% ranges from 30,001 to $120,000. How much will you pay in total taxes?arrow_forwardThe following table shows income tax rates in Econoland. Annual Income Up to $60,000 From $60,001 to $90,000 Over $90,000 This is an example of a Tax Rate 10% 20% 30% income tax. Nick, a resident of Econoland, currently works 20 hours a week and earns an annual income of $60,000. After paying income taxes, Nick receives per year. If Nick works an additional 10 hours a week (30 hours a week total), his annual income will be $90,000. After paying income taxes, Nick will receive per year. In other words, by working an additional 10 hours per week, Nick will receive an additional If Nick works 10 more hours in a week (40 hours a week total), his annual income will further increase to $120,000. After paying income taxes, Nick will receive per year. In other words, by working 10 more hours per week, Nick will receive more than what he would receive if he works only 30 hours a week. As Nick works more, the additional amount he receives from working 10 more hours " which means his cost of…arrow_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
- Explain why a proportional tax on wages is distortionary, making individuals worse off than raising the equivalent tax revenue from a lump sum tax.arrow_forwardIf older workers have a tax elasticity of labor supply equal to 0.55, by how much will their work activity decline when they reach the Social Security earnings test limit (.e.. wage ceiling)? Recall that the Social Security earnings test limit says that Social Security benefits will be reduced by 50 cents for every additional $1 earned after the wage ceiling. Instructions: Enter your response as a positive percentage rounded to one decimal place. Do not include a negative sign with your answerarrow_forwardFor purposes of assessing income taxes, there are three official income levels for workers in a small country: high, medium, and low. The table to the right gives the marginal tax rate for the last hour on the job during a 40-hour workweek for each of these three worker types. Based only on this information, this nation's income tax system appears to be regressive Worker type Low-income worker Medium-income worker High-income worker Marginal tax rate 15 percent 20 percent 25 percent proportional progressive regressivearrow_forward
- Suppose that for every hour worked in the labour market, single mothers use an hour of childcare, and the hourly childcare cost is π pounds. The members of Parliament are interested in evaluating the impact of two different policies: Policy 1: provides single mothers with a lump sum benefit. Policy 2: provides single mothers with a fixed tax cut for every pound earned. What are the impacts of these two policies on labour supply (hours worked and participation rates) of single mothers in the UK (United Kingdom)? Do you expect the impact of these two policies to be different? Why? (400 words)arrow_forwardIllustrate with a clear diagram and carefully explain the impact of an increase in the income tax rate from 25 percent to 35 percent on the demand for labour, supply of labour, equilibrium wage and level of employment.arrow_forwardAssume 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_forward
- A tax on labour income that does not eventually affect the number of labour hours supplied is non-distortionary. Do you agree or disagree with this statement. Explainarrow_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_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
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