Reference no: EM13183836
Suppose the supply for optometrists is given by LS= -6 + 0.6W, while the demand curve is given by LD= 50-W. Also, assume that the government imposes a payroll tax equal to $8 for each optometrist hired by a firm.
a. Find the equilibrium wage and employment before any tax is imposed
b.Draw a graph and indicate the worker surplus and rm surplus before the tax is imposed.
c.Numerically calculate the size of the pre-tax worker surplus, rm surplus and deadweight loss.
d. Find the post-tax equilibrium wage and employment.
e. What would be the wage the rms would oer to the workers if they wanted to hire the pre-tax number of optometrists?
f. On the same graph as in part (b) indicate the surplus of each agent participating in the optometrist market after the tax is imposed.
g. Numerically calculate the post-tax worker surplus, rm surplus, and deadweight loss.
h. Why does the government have an incentive to impose a payroll tax? Does the government get anything in return?
i. If the government benets from the tax, does this benet come from the workers, the firms, or both? What is the exact amount of reallocation from the workers (or firms) to the government?
j. Is the optometrist market better-o or worse-o after the imposition of the tax?
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