5. Suppose that under a new law all businesses must pay a tax equal to 6% of...
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5. Suppose that under a new law all businesses must pay a tax equal to 6% of their sales revenue. Assume that this tax is not passed on to consumers. Instead, consumers pay the same prices after the tax is imposed as they did before. What is the effect of this tax on labor demand? If the labor supply curve is unchanged, what will be the effect of the tax on employment and the real wage?
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