Labor taxes may distort labor markets greatly if
A)labor supply is highly inelastic.
B)many workers choose to work 40 hours per week regardless of their earnings.
C)the number of hours many part-time workers want to work is very sensitive to the wage rate.
D)"underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

Question

Quizplus · Accepted Answer

Labor taxes may distort labor markets greatly if the number of hours many part-time workers want to work is very sensitive to the wage rate. This means that small changes in wages due to taxes can have a significant impact on the decision of part-time workers to work or not. This can lead to reduced labor supply, increased wage costs for employers, and reduced economic activity.

Labor Taxes May Distort Labor Markets Greatly If