Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Consider the labor market. Suppose that the supply of labor is = 2 + H/2 and the demand for W=52−2H. Where W is wage and is hours worked.
Now suppose that the government levies a $5 per hour payroll tax on buyers of labor (firms).
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Determine the worker (supplier) and firm (buyer) tax burdens.
-
Determine the
deadweight loss associated with this payroll tax.
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