Question

In: Economics

Suppose that the government subsidizes employment. That is, the government pays the firm s units of...

Suppose that the government subsidizes employment. That is, the government pays the firm s units of consumption goods for each unit of labour that the firm hires.

In the presence of the subsidy, we observe that

(Show and explain your solution graphically

Solutions

Expert Solution


Related Solutions

Suppose that the government subsidizes employment. That is, the government pays the firm s dollars for...
Suppose that the government subsidizes employment. That is, the government pays the firm s dollars for each hour of labor the firm hires. In a graph that illustrates total revenue and total cost, illustrate the e§ect this subsidy has on the proÖt maximizing level of labor hired. Does it increase or decrease the labor?
2. Suppose that your government introduces an investment tax credit, which subsidizes domestic investment. How does...
2. Suppose that your government introduces an investment tax credit, which subsidizes domestic investment. How does this policy affect national saving, domestic investment, net capital outflow, the interest rate, the exchange rate, and the trade balance? 8. Suppose that your countrymen decide to increase their saving. a. If the elasticity of net capital outflow with respect to the real interest rate is very high, will this increase in private saving have large or small effect on domestic investment? b. If...
(a) Suppose the government passes a policy that declares that welfare, employment insurance, and all transfer...
(a) Suppose the government passes a policy that declares that welfare, employment insurance, and all transfer payments will remain constant regardless of changes in income. Will this policy increase or decrease the volatility (size of the variations in real GDP) of the business cycle? Hint: Consider the concept of automatic stabilizers and the impact of this policy on the multiplier (b) Would this policy increase or decrease the magnitude (size of the effect) of the effects of discretionary fiscal policy?...
The U.S. government subsidizes the private provision of health insurance through employers. Benefits paid to employees...
The U.S. government subsidizes the private provision of health insurance through employers. Benefits paid to employees are deductible as expenses by firms, but not recognized as taxable income by employees. Consider two employees, Ann and Bob, who work for two different employers. Ann earns $30,000, pays 15% in taxes, and pays $12,000 in premiums for health insurance offered by her employer. Bob earns $40,000, pays 25% in taxes, and has $12,000 worth of medical bills which he has to pay...
Your friend has recently told you that the federal government effectively subsidizes the use of debt...
Your friend has recently told you that the federal government effectively subsidizes the use of debt financing (vs. equity fi nancing) for corporations. Do you agree with that statement? Explain.
Describe 3 ways the government sector of American society subsidizes the private health insurance strategy?
Describe 3 ways the government sector of American society subsidizes the private health insurance strategy?
Let us suppose the demand at a firm is 200 units per month. The firm orders...
Let us suppose the demand at a firm is 200 units per month. The firm orders 80 units each time. How many times does the firm place an order per year? What is the average inventory level at this firm?
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units.
Correcting for negative externalities - Regulation versus tradablepermitsSuppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation.  2. The government allocates tradable pollution permits. Each firm...
Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units.
5. Correcting for negative externalities - Regulation versus tradable permitsSuppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods:Available Methods to Reduce Pollution1.The government sets pollution standards using regulation.2.The government allocates tradable pollution permits.Each firm...
Suppose that Country X subsidizes its exports and Country Y imposes a “countervailing” tariff that offsets...
Suppose that Country X subsidizes its exports and Country Y imposes a “countervailing” tariff that offsets the subsidy’s effect, so that in the end, relative prices in Country Y are unchanged. What happens to the terms of trade? What about welfare in the two countries? Suppose, on the other hand, that Country Y retaliates with an export subsidy of its own. Contrast the result.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT