Econ 341 Homework 4

Econ 341 Homework 4: Quiz Homework 4 – Hint: I would recommend printing out the homework so you can graphically model the taxes for questions 1-3 and 4-6.

Econ 341 Homework 4

Use the graph and following information to answer questions 1 through 3.
The market below shows the labor market without any taxes imposed. Suppose the government imposes a $500 per worker income tax on the market and workers are legally responsible for paying the $500 to the government.

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What will be the impact of the tax on the equilibrium wage in this market?
a. It will decrease to $2,500
b. It will decrease to $2,600
c. It will increase to $3,100
d. It will increase to $3,500
e. It will remain at $3,000

 

How will the incidence of the tax be split between the firm and workers?
a. Workers’ tax incidence will be the full $500 of the tax.
b. Firms’ tax incidence will be the full $500 of the tax.
c. Workers’ tax incidence will be $100 and firms’ tax incidence will be $400.
d. Workers’ tax incidence will be $400 and firms’ tax incidence will be $100.

3. What will happen to employment as a result of the tax?
a. It will decrease to 200 workers
b. It will decrease to 800 workers
c. It will decrease to 850 workers
d. It will remain at 1,000 workers
e. It will increase to 1,150 workers

Use the graph and following information to answer questions 4 through 6.
The market below shows the labor market without any taxes imposed. Suppose the government
imposes a $500 per worker income tax on the market and firms are legally responsible for
paying the $500 to the government.

What will be the impact of the tax on the equilibrium wage in this market?
a. It will decrease to $2,500
b. It will decrease to $2,600
c. It will increase to $3,100
d. It will increase to $3,500
e. It will remain at $3,000

5. How will the incidence of the tax be split between the firm and workers?
a. Workers’ tax incidence will be the full $500 of the tax.
b. Firms’ tax incidence will be the full $500 of the tax.
c. Workers’ tax incidence will be $100 and firms’ tax incidence will be $400.
d. Workers’ tax incidence will be $400 and firms’ tax incidence will be $100.

6. What will happen to employment as a result of the tax?
a. It will decrease to 200 workers
b. It will decrease to 800 workers
c. It will decrease to 850 workers
d. It will remain at 1,000 workers
e. It will increase to 1,150 workers

7. The CARES act passed by Congress last year offered a labor market subsidy to firms by covering
firms’ required contribution into their employees’ social security. When an employment subsidy
is given to firms, what will be the impact on labor market equilibrium?
a. Wages will increase and employment will increase.
b. Wages will decrease and employment will increase.
c. Wages will increase and employment will stay the same.
d. Wages will decrease and employment will stay the same.
e. Wages will increase and employment will decrease.
f. Wages will decrease and employment will decrease.

8. Which of the following will cause the wages in a labor market to decrease?
i. A tax that must be paid by workers.
ii. A tax that must be paid by firms.
iii. A subsidy given to workers.
iv. A subsidy given to firms.
a. i. only.
b. ii. only.
c. i. and ii. only
d. i. and iii. only
e. i. and iv. only
f. ii. and iv. only
g. ii. and iii. only

 

Which of the following will cause employment in a labor market to increase?
i. A tax that must be paid by workers.
ii. A tax that must be paid by firms.
iii. A subsidy given to workers.
iv. A subsidy given to firms.
a. i. only.
b. i. and ii. only
c. i. and iii. only
d. iii. and iv. only

10. Which of the following will cause the wages in a labor market to increase?
i. A tax that must be paid by workers.
ii. A tax that must be paid by firms.
iii. A subsidy given to workers.
iv. A subsidy given to firms.
a. i. only.
b. ii. only.
c. i. and ii. only
d. i. and iii. only
e. i. and iv. only
f. ii. and iv. only

 

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