Question 1
________ of the payroll tax if labor supply is perfectly elastic.
◦ Employees will bear the full burden
◦ Employers will bear the full burden
◦ Employers and employees will evenly share the burden
◦ If labor supply is perfectly elastic, there is no tax burden.
Question 2
A payroll tax is imposed on two types of labor: welders and machinists. In the short run, the elasticity of labor supply of welders is much more elastic than the elasticity of labor supply of machinists. Which of the following is
true?
◦ In the short run, welders will bear a larger share of the payroll tax than machinists.
◦ In the short run, machinists will bear a larger share of the payroll tax than welders.
◦ In the short run, welders and machinists will bear the same share of the payroll tax, but in the long run, machinists will bear a larger share of the payroll tax than welders.
◦ There is not enough information to determine the relative shares of the payroll tax for welders and machinists in either the short run or the long run.
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