OilPatch is a mineral rich economy in which the government gets most of its tax revenue from oil royalties. Table 1 describes the labor market in OilPatch and Table 2 describes the economy's production function. Initially, the government introduces an income tax of $ per hour worked. Then it doubles its income tax to $4 an hour. Following the implementation of the $4 an hour income tax, what is the level of employment, the real wage rate paid by employers, and the after-tax real wage rate received by workers? What is potential GDP?

OilPatch is a mineral rich economy in which the government gets most of its tax revenue from oil royalties. Table 1 describes the labor market in OilPatch and Table 2 describes the economy's production function. Initially, the government introduces an income tax of $ per hour worked. Then it doubles its income tax to $4 an hour. Following the implementation of the $4 an hour income tax, what is the level of employment, the real wage rate paid by employers, and the after-tax real wage rate received by workers? What is potential GDP?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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