If workers are mobile and well informed about the compensation packages available at different firms, the...

If workers are mobile and well informed about the compensation packages available at different firms, the mandated provision of employment benefits (e.g., health insurance) will tend to

	a.	make all workers worse off.
	b.	make all firms worse off.
	c.	make workers worse off if the reduction in wages that is necessary for firms to provide the benefits exceed what workers are willing to pay for the benefits.
	d.	make all workers better off.

What should be the effect on labor supply of reducing marginal income tax rates while keeping the total taxes paid by a worker constant?

	a.	Hours supplied should go up if the substitution effect dominates the income effect.
	b.	Hours supplied will go down,
	c.	Hours supplied stay the same.
	d.	Hours supplied should go up.

Solutions

Expert Solution

Answer 1 ( c) make workers worse off if the reduction in wages that is necessary for firms to provide the benefits exceed what workers are willing to pay for the benefits.

If workers are mobile and well informed about the compensation packages available at different firms, the mandated provision of employment benefits (e.g., health insurance) will tend to make workers worse off if the reduction in wages that is necessary for firms to provide the benefits exceed what workers are willing to pay for the benefits.

Answer 2 (d) Hours supplied should go up

If a person has preferences that lead to a choice of zero work hours, an increase in the wage rate will result ina substitution effect only.

Rahul Sunny answered 1 year ago

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