a. Consider first a national labor market. While workers and firms can move across national boundaries to

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a. Consider first a national labor market. While workers and firms can move across national boundaries to escape domestic taxes, suppose that this is prohibitively costly for the labor market that we are analyzing. Illustrate demand and supply curves for domestic labor (assuming that supply is upward sloping). Indicate the no-tax equilibrium wage and employment level and then show the impact of a wage tax.

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