LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 4, Problem 4RQ
To determine
The effects of payroll tax on wages and employment in a competitive industry.
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Describe the impact of a payroll tax on wages and employment in a competitive industry. Why is part of the tax shifted to workers? What is the deadweight loss of the payroll t ax?
Payroll 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.
The market for soft drinks is perfectly competitive. Assume that the supply of soft drinks is point elastic and upward sloping. The government imposes a consumer tax on soft drinks. If point elasticity of demand is inelastic, is the deadweight loss generated by the tax higher or lower relative to where the point elasticity of demand is elastic? Explain why.
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- What is the price firms receive after the tax is in placearrow_forward1) Below is the demand and supply schedule for the market for personal chefs. These are chefs that are hired to come into the client’s home to prepare meals for them. Show all your calculations used to answer the following questions. d)calculate the excess demand or supply at the price of $35,$70,$25 and $65 e) If tax of 5$ imposed compute the consumer and producer tax burden Price per hour Qty supplied Qty demanded 20 0 29 25 1 26 30 3 23 35 5 20 40 7 17 45 9 14 50 11 11 55 13 9 60 15 7 65 17 5 70 19 3 75 21 1 80 23 0arrow_forwardThe deadweight loss associated with a tax on labor income is higher if the supply of labor is relatively ________. a. elastic b. inelastic c. elastic or inelastic as elasticity does not influence deadweight loss.arrow_forward
- Why do labor experts disagree about whether labor taxes have small or large deadweight losses? Given your knowledge of economics and experience to date, what is your view on the issue? Explain your reasoning.arrow_forwardEconomists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about the size of labor taxes. the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states. the elasticity of labor demand. the elasticity of labor supply.arrow_forwardDiscuss the impact the Marketplace Fairness Act will have on small retailers in the US. Is it fair that small retailers should have to collect sales taxes on online sales to customers outside of their state?arrow_forward
- The federal government currently levies a 15.3 percent payroll tax (7.65 percent on both the employer and employee) on the wages of all workers. If the demand for labor is relatively elastic when compared to the inelastic supply of labor, the burden of this tax will fall primarily on employees. fall primarily on employers. be divided equally between employees and employers. O Its impossible to tell from this information.arrow_forwardQuestion 2c - Part 2 Given the following information QD = 240 – 5P Qs = P where Qp is the quantity demanded, Qs is the quantity supplied and P is the price. Calculate: Producer surplus before tax ENTER FINAL ANSWER ONLY. NO WORKINGS Answer:arrow_forwardCan you explain why I got this wrong? I thought that if the supply was more inelastic then the employers would bear more of the tax? Im confused.arrow_forward
- A specific tax will be imposed on a good. The supply and demand curves for the good are shown in the diagram below. Given this information, the burden of the tax: Price ($ per unit of output) Supply Demand Output O A) falls mostly on consumers. B) falls mostly on producers.arrow_forwardWhat happens to the market equilibrium price and output when tax is imposed on the buyers? Is the burden fall only on buyers – Explainarrow_forwardIn an unregulated, competitive market we could calculate consumer surplus if we knew the equations representing supply and demand. For this problem assume that supply and demand are as follows: Supply P = 4 + 0.116Q Demand P = 25 - 0.10Q where P represents unit price in dollars and Q represents the number of units sold each year. Calculate the annual value of aggregate consumer surplus.arrow_forward
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