Reference no: EM133598638

Question: There are four types of people: 1. Type 1 (100): Can earn $5 per hour 2. Type 2 (400): Can earn $10 per hour 3. Type 3 (400): Can earn $25 per hour 4. Type 4 (100): Can earn $100 per hour Washington B.C. is a city with 1,000 people. People who work 40 hours per week. People choose how many weeks they work and can work up to 50 weeks per year. Washington B.C. initially has no tax and transfer programs.

Question 1 1. What is the dollar value of each type of worker's time? (How much income would they earn if they worked 52 weeks?)

Question 2 Suppose that initially all workers work 40 weeks per year. 1. Depict the Type 2 workers' budget constraint on a graph 2. How much money does each worker earn? What is the total earned income of Washington?

Question 3 Suppose Washington levied a 10% income tax ($1 of tax per $10 of income). 1. How much revenue would Washington collect if workers did not respond to taxes? 2. Suppose each worker's elasticity of weeks worked with respect to wages was 0.3 (i.e. a 1% increase in wages increases weeks worked