4. Minimum wage legislation The following graph gives the labor market for the fastfood industry of the imaginary city of Combopolis. Use the graph Input tool to help you answer the following questions. 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 change accordingly. Graph Input Tool Market for Labor in the Fast Food Industry [I Wage (Dollars per hour) 13 Supply Labor Demanded 500 Labor Supplied (Hundreds of (Hundreds of workers) workers) 20 18 16 14 12 1D Demand WAGE (Dollars per hour) l\\ --I+ D 50 100 150 200 250 300 350 400 450 500 LABOR (Hundreds orworicers) In this market, the equilibrium wage is $ per hour, and the equilibrium quantity of labor is hundred workers. Suppose the mayor of Combopolis introduces a legal minimum wage of $6 per hour. This type of price control is called a tax price floor For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supp price ceiling irection of pressure exerted on wages in the absence of any price controls. quota Wage Labor Demanded Labor Supplied (Dollars per hour) (Hundreds of workers) (Hundreds of workers) Pressure on Wages 12 8 True or False: A minimum wage above $10 per hour is not a binding minimum wage in this labor market. O True O FalseFor each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls. Wage Labor Demanded Labor Supplied (Dollars per hour) (Hundreds of workers) (Hundreds of workers) Pressure on Wages 12 8 Upward True or False: A minimum wage above $10 per hour is not a binding minimum wage harket. Downward O True O False5. Calculating tax incidence Suppose that the local government of Corpus Christi decides to institute a tax on cider consumers. Before the tax, 40 million cases of cider were sold every month at a price of $10 per case. After the tax, 33 million cases of cider are sold every month; consumers pay $12 per case (including the tax), and producers receive $8 per case. The amount of the tax on a case of cider is $ per case. Of this amount, the burden that falls on consumers is $ per case, and the burden that falls on producers is $ per case. True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers. O True O False6. who should pay the tax? The following graph gives the labor market for laboratory aides in the imaginary country of Paideia. The equilibrium hourly wage is $10r and the equilibrium number of laboratory aides is 250. Suppose the federal government of Paideia has decided to institute an hourly payroll tax of $4 on laboratory aides and wants to determine whether the tax should be levied on the workers, the employers, or both (in such a way that halic the tax is collected from each party). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied 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 Levied 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 field until the quantity of labor supplied equals the quantityr of labor demanded. You will not be graded on an y 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 change accordingly. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool 20 Market for Laboratory Aides 18 Wage 4 16 (Dollars per hour) Supply Labor Demanded 625 Labor Supplied 0 14 (Number of workers) (Number of workers) 12 Demand Shifter Supply Shifter WAGE (Dollars per hour) CO Demand Tax Levied on 0 Tax Levied on 0 Employers Workers (Dollars per hour) (Dollars per hour) N 50 100 150 200 250 300 350 400 450 500 LABOR (Number of workers)For each of the proposals, use the previous graph to determine the new number of laboratory aides hired. Then compute the after-tax amount paid by employers (that is, the wage paid to workers plus any taxes collected from the employers) and the after-tax amount earned by laboratory aides (that is, the wage received by workers minus any taxes collected 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) (Dollars per hour) Employers Workers workers) (Dollars per hour) (Dollars per hour) 4 0 O N N Suppose the government doesn't want to discourage employers from hiring laboratory aides and, therefore, wants to minimize the share of the tax paid by the employers. Of the three tax proposals, which is best for accomplishing this goal? O The proposal in 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 others7. Effect of a tax on buyers and sellers The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $11.60 per case. The tax places a wedge between the price buyers pay and the price sellers receive. 50 40 Supply 35 30 Tax Wedge 25 PRICE (Dollars per case) 20 15 10 Demand 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Cases of craft beer)Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers PawI Price Sellers Receive (Cases of craft beer) (Doiiars per case) (Dollars per case) Using your answers from the previous tabie, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden (Dollars per case) Elasticity E _v E _ Sellers V more The tax burden falls more heavily on the side of the market that is V elastic