Which of the following will result from a social security tax if the labor supply curve is vertical,but the labor demand curve is downward-sloping?
A)Lower after-tax wages
B)Unchanged levels of employment
C)Higher labor costs to firms
D)A fall in output prices

Question

Quizplus · Accepted Answer

If the labor supply curve is vertical, it means that the quantity of labor supplied will not change in response to an increase in the social security tax. However, the downward-sloping demand for labor curve means that employers will be willing to hire fewer workers at every wage rate due to the increase in labor costs. This will result in lower after-tax wages for workers as firms will pass some of the burden of the tax to their employees to compensate for the increased labor costs.

Which of the Following Will Result from a Social Security