A Payroll Tax Is Imposed on Two Types of Labor

question 155

Multiple Choice

A payroll tax is imposed on two types of labor: carpenters and laborers. In the short run, the elasticity of labor supply of carpenters is much less elastic than the elasticity of labor supply of laborers. Which of the following is true?

• A) In the short run, carpenters will bear a larger share of the payroll tax than laborers.
• B) In the short run, laborers will bear a larger share of the payroll tax than carpenters.
• C) In the short run, carpenters and laborers will bear the same share of the payroll tax, but in the long run, laborers will bear a larger share of the payroll tax than carpenters.
• D) There is not enough information to determine the relative shares of the payroll tax for carpenters and laborers in either the short run or the long run.

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Definitions:

Market

A place or mechanism where buyers and sellers interact to trade goods, services, or assets, determining prices through supply and demand.

Money Supply

The entirety of cash, coins, and checking and savings account balances that make up the financial assets in an economy at a specific point in time.

Inflation

The rate at which the comprehensive cost levels of goods and services rise, diminishing the effectiveness of financial power.

Unemployment

The condition where people who are able and willing to work cannot secure jobs despite actively looking for one.