Suppose That All Workers Place a Value on Their Leisure

question 17

Multiple Choice

Suppose that all workers place a value on their leisure of 75 goods per day.The production function relating output per day Y to the number of people working per day N is Y = 500N - 0.4N² and the marginal product of labour is MPN = 500 - 0.8 N.A 25% tax is levied on wages.In terms of lost output,what is the cost of the distortion introduced by this tax?

• A)63
• B)531
• C)2734
• D)3751

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