Calculate the equilibrium amount of labour supplied

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Next, consider an example of DWL in the labour market. Suppose the demand for labour is given by the fixed gross wage W = $16. The supply is given by W = 0.8L.

(a) Illustrate the market geometrically.

(b) Calculate the equilibrium amount of labour supplied, and the supplier surplus.

(c) Suppose a wage tax that reduces the wage to W = $12 is imposed. By how much is the supplier's surplus reduced at the new equilibrium?

Reference no: EM131072624

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