I. Social security taxes are at times increased by making firms pay more tax per hour on workers they employ.Some believe that while this tax increases costs of production to some extent, it is more equitable (fair) to levy taxes on firms rather than workers, since employers are typically wealthier.

Suppose that at any given "gross" wage rate W_F (which includes all firm payments to workers and to government in dollars per year), firms are willing to hire

Q = 144 million - 2000 W_F

workers.Suppose also that at any given "net" wage W_W (which includes only the "take-home-pay" that workers receive in dollars per year; it does not include any part of the wage that goes to government),

Q = -48 million + 6000 W_W (for W_W >8000; Q=0 for W_W 8000)

is the number of workers that will desire work.Let W be the "list" wage set forth in wage contracts between firms and workers.Note that W might not equal W_W and/or W_F because of taxes.Assume workers work 2000 hours per year when employed.

A) With no social security tax or tax of any other kind, what will be the equilibrium

A1. wage rate?

A2. number of workers employed?

B) Suppose that a social security tax of $1 per hour ($2000 per year) is levied on the workers.

B1. What will the equilibrium net wage (W_W) received by workers be?