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?
Chapter16: Labor Markets
Section: Chapter Questions
Problem 16.4P
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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
• 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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