Suppose in the Absence of a Tax a Firm Employs

question 4

Multiple Choice

Suppose in the absence of a tax a firm employs 50 skilled workers at a wage rate of $20 per labor hour.If the supply of labor is perfectly inelastic,what will be the impact of a $2.50 per hour tax on the net wage received by the workers and total employment?

• A)The net wage received by workers will be $17.50 per labor hour but total employment will not change.
• B)The net wage received by workers will be $15 per labor hour and total employment will reduce to 25 workers.
• C)The net wage received by workers will be $1750 per labor hour and total employment will reduce to 45 workers.
• D)The net wage received by workers will be $15 per labor hour and total employment will increase to 75 workers.

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