Author Question: In the market depicted in the above figure, if a single-price monopoly maximizes its profit, which ... (Read 35 times)

mikaylakyoung · **on:** Jun 29, 2018

In the market depicted in the above figure, if a single-price monopoly maximizes its profit, which area shows the consumer surplus?

A) area GHIL
B) area HIJ
C) area HJKG
D) area NFL

Question 2

The Social Security tax is a tax that Congress imposes equally on both employers and employees. Does this mean that the burden of this tax is shared equally between firms and workers? Explain.

What will be an ideal response?

Li Jun · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

No. A tax has the same effect regardless of whether it's imposed on buyers (employers) or sellers (employees). The division of the burden of a tax between firms and workers depends on the elasticities of labor demand and labor supply, not on the tax law. That is, the market for labor, not Congress, decides how the burden of the Social Security tax is divided by firms and workers.