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What Happens to the Acceptable Wage Rate at Each Level

Question 52

Multiple Choice

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

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

Correct Answer: