Suppose That Taxes on Labor Are Increased by 10 Percent

question 37

Multiple Choice

Suppose that taxes on labor are increased by 10 percent and workers respond by working 2 percent fewer hours.It can be said that

• A)The tax elasticity of the labor supply is 0.2.
• B)The labor supply is elastic.
• C)Employers will face lower unit costs for each worker hired.
• D)The tax elasticity of the labor supply is 5.