# solution

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(a) On the graph below, draw the supply and demand for labor represented by the following data:

(b) How many workers are employed in equilibrium?

 Wage Quantity of labor \$1 2 3 Â 4 5 6 Â 7 Â 8 Â 9 Â 10 Â 11 Â 12 Supplied 1 2 3 Â 4 5 6 Â 8 Â 10 Â 12 Â 14 Â 17 Â 20 Demanded 20 18 16 Â 14 12 10 Â 8 Â 6 Â 5 Â 4 Â 3 Â 2

(c) What wage are they paid?

(d ) Now suppose a payroll tax of \$2 per worker is imposed on the employer. Draw the â€œsupply +

taxâ€ graph that results.

(e) How many workers are now employed?

( f ) How much is the employer paying for each worker?

(g) How much is each worker receiving?

For the incidence of this tax,

(h) What is the increase in unit labor cost to the employer?

(i) What is the reduction in the wage paid to labor?

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