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Question: 6 who should pay the tax the follawing graph shows...

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6. Who should pay the tax? The follawing graph shows the labor market for research assistants in the fictional country of Collegia. The equilibrium wage is $10 per hour, and the equilbium number of research assistants is 250. Suppose the govemment has decided to institute a $4-per-hour payroll tax on research assistants and is trying to decermine whether the tax should be levied on the employer, the workers, or both (such that half the tax is collected from each side). Use the graph input zool to evaluate these three proposals. Entening a number into the Tax Levied on Empioyers field (initially ser at zero dollars per hour) shifts the demand curve down by the amount you enter, and entening a number into the Tax Levied on Workers fied (initially set at zero dollars per hour) shifts 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 field until the quanbity of labor supplied equais the quanbty of labor demanded. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will hange accordingly Graph Input Tool Market for Research Assistants 2) 18 16 14 12 10 wage Collars per our Labor Demanded Number of workers) Sur ply 825 Labor Supplied fNumber or workers) Demand Shifter Supply Shifter De and Tax Levied on Employers Dolas per hour) Tax Levied on Workers (Dollars per hour) 50 100 150200 250 300 150 40 450 50 LABOR (Number of workers)

Graph Input Tool Market for Research Assistants 21 n Wage (Dullers per hour) Labor DemandedLbr l) 16 Sup ply Number of workers) 825 Number of workers) 12 Demand Shifter Supply Shifter Dem and Tax Levied on Emplovers (Doilars per hour Tax Levied on Workers (Dollars per hour) so 100 153 200 250 30350 4 450 s00 LABOR (Number of workers) For each of the proposals, use the previous graph to determine the new number of research assistants hired. Then compute the after-tax amount paid by empioyers (chat is, the wage paid to workers plu after tax amount eamed by research assistants (that is, the wage received by workers minus any taxes collected from the workers) s any taxes collected from the employers) and the After-Tax Wage Paid by Employers (Dollars per hour) After-Tax Wage Received by Workers (Dollars per hour) Tax Proposal Levied on Employers (Dollars per hour) Levied on Workers (Dollars per hour) Quantity Hired (Number of workers) Suppose the govemment is concerned that research ass stants already make too little money and, therefore, wants to minimize the share of the tax paid by employees. Of the three tax proposals, which is best for accomplishing this goal? O The proposal an which the entire tax is collected from workers O The proposal in which the tax is collected from each side evenly O The proposal in which the tax is collected from employers O None of the proposals is better than the others

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