Macro- & Monetary Economics

Prio: Normal, Part I: Neoclassical Model, Type: MC, Quiz 1

Suppose that the government imposes a producer tax, i.e. the firm pays t units of consumption goods for every unit of output produced. The firm's profits are given by (1-t) * z F(K^*,N^d) - wN^d . If the producer tax rises,

  • The firm's demand for labor goes down
  • The firm's demand for labor is unaffected
  • The firm's demand for labor goes up
  • The firm doesn't demand any labor,i.e. N^d = 0
 

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