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

The first table to the left describes the labor market in LowTaxLand and the second table to the right describes the economy€™s production function. LowTaxLand introduces an income tax of $1 per hour worked.

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Production function Labor market Real wage rate Quantity of labor supplied (thousands of hours) Quantity of labor Real GDP (millions of Employment (thousands of hours) (dollars per hour) 10.00 demanded (thousands of hours) dollars) 18 10.50 15 12 12 12 16 11.00 12 11.50 12.00 15 18 15 18 19 6 3 21 12.50 21 21 22