Question

6. Who should pay the The following graph shows the lobor market for rescarch ass stants in the fictional country of Academia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 250 Suppose the govenment has decided to institute a $4-per-hour payroll tax on research assistants and is trying to determine whether the tax should be levied on the employer, the workers,or bath (auch that hai the tax is collected from each side) Use the graph input tool to evaluate these three proposals. Entering a nwmber into the Tax Levled on Employers feld (nitialy set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied onm Workers feld initlaly set at zero dolars per hour) shits the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage fheld untir the quantity of labor suppled equals the quantity of labor demanded. You wW not be graded on any changes you make to ths graph. Note: Once you entera value in a white field, the graph and any corresponding amounts in each grey ficld w change accordingly. Graph Input Tool Market for Research Assistants per hour) 625 Labor Suppied Nwmber af workers Mnber af workers) Demand Shifter Supply Shifter Tax Levied on Employers (Doars per hour) Tax Levied on (Dolars per hour) 0 50 100 150 200 250 300 350 400 450 500 LABOR (Number af workers) For each of the proposals, use the previous graph to determine the new number of rescarch assistants hired. Then compute the after-tax amount paid by employers(that is, the wage pald to workers plus any taxes coWected from the employers) and the after-tax amount earned by research assistants (that is, the wage received by workers minus any taxes colected trom the workers). After-Tax Wage Paid by Employers Dollars per hour) After-Tax Wage Received by Tax Proposal Quantity Hired (Number of (Dollars per hour) Employers (Dollars per hour) Workers Dolars per hour) Suppose the govenment docsn't want to d scourage employers from hiring rescarch assistants and, therefore, wants to min imize the share of the tax paid by the employers. Of the three tax proposals, which is best for accomplishing this goal? O The propasal in which the entire tax is collected from workers O The proposal in which the tax is colected from each side evenly O The propasal in which the tax is co ected from employers O None of the propasals is better than the others

Answer 1