What Happens to the Acceptable Wage Rate at Each Level

question 73

Multiple Choice

What happens to the acceptable wage rate at each level of employment once an income tax is levied on labor income?

• A) Nothing, it remains the same.
• B) It increases by the amount of the tax that must be paid.
• C) Workers and employers split the tax, so the acceptable wage increases by half the tax.
• D) Because workers have to work more to make up for the tax, the acceptable wage rate falls by some amount that cannot be determined.
• E) Because workers have to work more to make up for the tax, the acceptable wage rate falls by the precise amount of the tax that must be paid.

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Definitions:

Total Fixed Costs

The sum of all costs that do not change with the level of production or services provided, such as rent and salaries.

Average Variable Cost

The total variable cost of producing a good divided by the quantity of the good produced, representing the variable cost per unit.

Average Total Costs

The total costs of production (fixed plus variable) divided by the total quantity of output produced, expressing the cost on a per-unit basis.

Economies of Scale

The savings that organizations achieve through their size of operation, where the expense per produced unit consistently decreases with an upscaling in operation.