Question 1
Firms may react to a payroll tax by
◦ substituting labor for capital.
◦ increasing their output.
◦ shifting to more capital intensive techniques.
◦ increasing workers' wages.
Question 2
Refer to the information provided in Figure 19.1 below to answer the question(s) that follow.
Refer to Figure 19.1. Prior to the imposition of a payroll tax, this labor market was in equilibrium at a wage of ________ and employment of ________ workers.
◦ $5.00; 500
◦ $7.00; 800
◦ $10.00; 700
◦ $12.00; 650