Multiple Choice
If the price elasticity of supply of labor is equal to 0.5 and the price elasticity of demand for labor is -2, then which of the following is likely to result from a tax on labor earnings?
A) The tax will be fully borne by workers.
B) Some of the tax will be shifted to employers as market equilibrium wages increase.
C) Market equilibrium wages will decline.
D) There will be no effect on market equilibrium wages.
Correct Answer:
Verified
Correct Answer:
Verified
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