Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 18, Problem 8P
To determine
As to how work incentives are affected by the implicit tax on earned income and how do some people avoid the implicit tax.
Concept Introduction:
Implicit Tax – It refers to the indirect cost that is incurred as the result of getting employment, because welfare program assistance is missed.
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Unemployment benefits are subject to income taxes. They are not (by default) subject to withholding, or to payroll taxes. Suppose that a particular worker is subject to a payroll tax of 7.65% of her wages; that she pays an average income tax rate of 10%; and that after losing her job, she is eligible to receive 60% of her previous weekly income. (Show Work)
(a) What fraction of her take-home paycheck will she receive from unemployment insurance?
(b) What effect does the tax treatment of unemployment insurance benefits have on the ability it provides its recipients for smoothing?
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Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
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APPORTIONMENT (COMPUTATION)
1. What leisure activities do you participate in? In the table below, there
are five activities and the approximate number of participants (in
millions) in each.
Exercise
Sports
Charity Work
Home Repair
Computer Hobbies
150
90
85
130
80
Suppose you wish to allocate $100 million to promote leisure activities
based on the number of participants.
a. Find the modified quota for each activity using the divisor 5.25
b. Find how much money should be apportioned to each activity using
Jefferson's Method.
Economics
The Raleigh City Council has just voted to levy a
sizable per-garage-space tax on single family
homes, arguing that garages, and especially multi-
car garages, are an excellent indicator of the
earnings of the residents. Why would the City want
to impose such a tax? What are some potential
problems with this tax? What changes in single-
family homes might you predict if the new tax is
implemented? And what changes in the amount of
home building might you expect relative to Chapel
Hill or Durham?
Chapter 18 Solutions
Econ Micro (book Only)
Knowledge Booster
Similar questions
- [Income Distribution]What is meant by the trade-off between equity and efficiency? Is there always such a trade-off ?arrow_forward(6) What does efficiency-wage theory suggest as an alternative to this decision of wage and/or headcount reduction?arrow_forwardMICROECONOMICS Solutions to Problem Set 3 1. (Labour Supply) A worker derives utility from consumption (that is, goods per day), denoted by Y, and leisure, denoted by L: U = U (Y, L) and faces the "bud- get" constraint Y = w (24L) (NB: In contrast to the lecture handout, initially the worker has no nonlabour income.) (a) Is w "real" or "nominal" wage?arrow_forward
- Family Flowers employs 17 people, of whom 14 earn gross pay of $640.00 each and 3 earn gross pay of $720.00 each on a weekly basis. What is the employer's share of total social security and Medicare taxes for the first quarter of the year? (Social security tax is 6.2% of wages up to $128,400. Medicare tax is 1.45% of all wages.)arrow_forward3. (Bhattacharya, Chapter 5) Fun with IRR. Suppose you have just graduated from college and are deciding on a career. Your four career options, along with your salary in each of the four earning periods, are displayed in Table 5.3. Assume that any career will only last four periods before retirement. Table 5.3: Career options and salary information for Exer- cise 11. Salary Occupation Period 0 Period 1 Period 2 Period 3 Ophthalmologist Accountant Starving artist Sports superstar -5 1 10 12 2 3. 1 4 1 1 15 Assume your discount factor is 6 = 0.95. Interpret this assumption. b. Find the value of the interest rate r that corresponds to your discount factor. c. Assuming 6 = 0.95, calculate the net present value (NPV) of becoming an ophthalmologist and of becoming an accountant. Which career do you prefer? d. Now assume your discount factor is 6 = 0.6. Calculate the net present value (NPV) of becoming an ophthalmologist and of becoming an accountant. Now which career do you prefer? Explain.…arrow_forward(8) The consumer price index using a __________________________ __________________________ __________________________ __________________________ __________________________ to calculate the index value.arrow_forward
- What is the poverty line?arrow_forwardExcise taxes on tobacco and alcohol and state sales taxes are often criticized for being regressive. Although everyone pays the same rate regardless of Income, why might this be so?arrow_forward19. The completion of a degree or course of study is a good labor market signal (A) only if what is learned in that educational process relates directly to the job the individual is being considered for (B) only if there is a positive correlation between academic success and wage income. C)primarily because individuals develop good habits in college that serve them well in other areas later on. D) because all individuals have the opportunity (in the United States) to pursue higher education. E) because people who possess the traits that make them more productive in the workplace have an easier time completing an education than those who don't.arrow_forward
- Labor force participation rates have been falling from most (though not all) segments of the working age population. (a) How do you explain this when simultaneously so many people are complaining about their economic situation? (b) How does the Earned Income Tax Credit (EITC) attempt to deal with this problem?arrow_forward5 What are factors contributing to the de-professionalization of teachers? (Education)arrow_forward(12.)what impact does inflation have on the value of business ?arrow_forward
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