Consider the impact of a $2 payroll tax imposed on firms—i.e., the firm will pay a tax of $2 for every employee-hour it hires. • If the labor supply curve is perfectly inelastic, what will be the effect of this payroll tax on the equilibrium wage and employment? Will there be any deadweight loss from the payroll tax in this case?• If the labor supply curve is perfectly elastic, what will be the effect of the payroll tax on the equilibrium wage and employment? Will there be any deadweight loss in this scenario?
Consider the impact of a $2 payroll tax imposed on firms—i.e., the firm will pay a tax of $2 for every employee-hour it hires. • If the labor supply curve is perfectly inelastic, what will be the effect of this payroll tax on the equilibrium wage and employment? Will there be any deadweight loss from the payroll tax in this case?• If the labor supply curve is perfectly elastic, what will be the effect of the payroll tax on the equilibrium wage and employment? Will there be any deadweight loss in this scenario?
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter18: Pricing The Factors Of Production
Section: Chapter Questions
Problem 3TY
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Consider the impact of a $2 payroll tax imposed on firms—i.e., the firm will pay a tax of $2 for every employee-hour it hires.
• If the labor supply curve is perfectly inelastic, what will be the effect of this payroll tax on the equilibrium wage and employment? Will there be any deadweight loss from the payroll tax in this case?
• If the labor supply curve is perfectly elastic, what will be the effect of the payroll tax on the equilibrium wage and employment? Will there be any deadweight loss in this scenario?
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