Use the following diagram to answer the following questions.

-Refer to Payroll. Suppose a payroll tax of 7% is imposed. By how much will the wage rate of the workers fall?

Question

Use the following diagram to answer the following questions.
 
-Refer to Payroll. Suppose a payroll tax of 7% is imposed. By how much will the wage rate of the workers fall?

Quizplus · Accepted Answer

The payroll tax will increase the cost of labor for firms, causing a leftward shift in the supply curve for labor. This will result in a new equilibrium with a lower wage rate and lower quantity of labor. The wage rate will fall by the same percentage as the tax, which is 7%. Therefore, the correct answer is B, 7%.

Use the Following Diagram to Answer the Following Questions