Suppose that a new tax on hiring labor is imposed. The demand for labor will ________, and as a result real wages will ________ and employment will ________.

Question

Quizplus · Accepted Answer

When a new tax on hiring labor is imposed, the cost of hiring workers increases for employers, reducing the demand for labor. As a result, real wages will decrease as employers offer lower wages to offset the increased cost of hiring workers, and employment will decrease as fewer workers are hired. Therefore, the correct choice is B.

Suppose That a New Tax on Hiring Labor Is Imposed