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Unformatted text preview: 9. (10 pts) Describe an earned-income tax credit for workers (and a tax on employers that would raise enough money to pay for it) that would make both workers and employers better off than under the minimum wage. Answer : The government would have to offer a tax credit worth at least $1.40/hr for each of the 100,000 person-hours of employment to match the additional $140,000/day of worker surplus. Because employer surplus is $180,000/day lower under the minimum wage than under the earned-income tax credit, employers would be willing to pay a tax up $180,000 to avoid the reduction in their surplus due to the minimum wage, an amount sufficient to finance the earned-income tax credit required and make workers and employers better off....
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.
- Spring '08