LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: 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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LABOR ECONOMICS (LL+ACCESS)
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- The 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_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_forwardThe 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_forward
- Discuss 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_forwardResult Value Per-unit tax Equilibrium quantity after tax Price consumers pay after taxarrow_forwardA 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_forward
- Don't use pen or paperarrow_forwardThe market for N-95 masks is perfectly competitive. Market Demand is given by Q=464-2P and Market Supply is given by Q=5P. The government imposes a per-unit tax of $2. How much tax revenue does the government collect? Enter a number only, drop the $ sign. Note: you don't need to know who pays the tax to answer this question.arrow_forwardSuppose the equilibrium for the market of staplers has a price of $49, at which 136 staplers are sold. The Government believes staplers are undervalued and imposes a price floor of $57 under which only 72 staplers are transacted, generating a deadweight loss of $382. What size tax would mimic the effect that the price floor has on consumers? Answer:arrow_forward
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