If the labor supply curve is nearly vertical,a tax on labor
A)has a large deadweight loss.
B)raises a small amount of tax revenue.
C)has little impact on the amount of work that workers are willing to do.
D)results in a large tax burden on the firms that hire labor.

Question

Quizplus · Accepted Answer

If the labor supply curve is nearly vertical, it indicates that workers have a limited ability to increase their labor supply in response to changes in wages. Therefore, a tax on labor would have little impact on the amount of work that workers are willing to do. This suggests that workers would continue to work the same hours, and there would be no deadweight loss, nor a significant burden on firms, but only a small amount of tax revenue raised.

If the Labor Supply Curve Is Nearly Vertical,a Tax on Labor