2. Who should payr the tax? The following graph shows the labor market for research assistants in the ctional country of Universalia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 250. Suppose the government has decided to institute a $4perhour payroll tax on research assistants and is trying to determine 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 tool to evaluate these three proposals. Entering a number into the Tax tevied on Employers field (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax tevied on Workers field ( initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the beforetax wage for each tax proposal, adjust the amount in the Wage eld until the quantity ol' labor supplied equals the quantity 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 eld, the graph and any corresponding amounts in each grey field will change accordingly. WAGE (Dollars per hour) M G _|. 09 16 d .p. _|. M l 10 l Sunply ------- + Demand l 0 50 10:: 150 200 250 30:: 350 400 450 500 LABOR (Number of workers) Graph Input Tool Market for Research Assistants I Wage (Dollars per hour) Labor Demanded (Number of workers) E 625 Labor Supplied (Number of workers) Demand Shifter Tax Levied on Employers (Dollars per hour) E Supply Shifter Tax Levied on Workers (Dollars per hour) E For each of the proposais, use the previous graph to determine the new number of research assistants hired. Then compute the after-tax amount paid by empioyers ( that is, the wage paid to workers pius any taxes coiiected from the empioyers) and the aftertax amount earned by research assistants (that is, the wage received by workers minus any taxes coiiected from the workers). After-Tax Wage Paid by After-Tax Wage Received by Tax Proposal Quantity Hired Employers Workers Levied on Levied on (Number of (Dollars per hour) (Doiiars per hour) Employers Workers workers) (Dollars per hour) (Dollars per hour) 4 0 E E E o 4 E E E 2 2 E E E Suppose the government is concerned that research assistants 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? 0 The proposal in which the entire tax is collected from workers 0 The proposal in which the tax is collected from each side evenly O The proposal in which the tax is collected from employers 0 None of the proposals is better than the others