An increase in the employment tax will have no effect on output if the labor supply curve

Name: An increase in the employment tax will have no effect on output if the labor supply curve
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Question

Quizplus · Accepted Answer

If the labor supply curve is perfectly vertical, it means that the quantity of labor supplied is fixed and not affected by changes in the wage rate. Therefore, an increase in the employment tax (which is essentially a wage rate reduction) will not affect the supply of labor, and thus will not impact output.

An Increase in the Employment Tax Will Have No Effect