What are the levels of employment and potential GDP in Oil Patch, what is the real wage rate paid by employers, and what is the after-tax real wage rate received by workers? 

OilPatch is a mineral rich economy in which the government gets most of its tax revenue from oil royalties. But OilPatch has an income tax. The left table above describes the labor market in OilPatch and the right table above describes the economy€™s production function. The government introduces an income tax of $2 per hour worked.

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Production function Real GDP Labor market Real wage rate Quantity of labor supplied (thousands of hours) Quantity of labor Employment (thousands (millions of (dollars per hour) 10 || demanded (thousands of hours) of hours) 2 3 dollars) 3 5 12 13 15 18 4 3 5 20 21 14 15 23 4 567 654 m2I