Tax impact on labour supply curve and short run

Reference no: EM1313970

1. Describe (in a sentence or two) the short run profit maximization condition when labour is the only variable input? What will happen to the labour demand if price of the output goes up?

2. What happens to employment in a competitive firm that experiences a technology shock such that at every level of employment its output is 200 units/hour greater than before?

3. Suppose the government imposes a payroll tax on all employers. Please draw and explain (briefly) the impact of such a tax on workers and employers for the following cases

i) Labour supply curve is perfectly inelastic

ii) Labour supply curve is unit elastic (i.e. upward sloping)

Reference no: EM1313970

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