Figure 8.2 illustrates the labor market in a country that does not tax labor income. Suppose that the government introduces a Social Security tax on workers of $2 per hour.

Data from in Figure 8.2

If the government splits the Social Security tax equally between workers and employers, how many workers are employed? What is the wage rate paid by employers and what is the workers’ after-tax wage rate?

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FIGURE 8.2 Chapter Checkpoint Study Plan Problem 7 Wage rate (dollars per hour) 12. || 10. 9 0 800 900 LS LD 1,000 Quantity (workers)