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

How many workers are employed? What is the wage rate paid by employers and what is the workers’ after-tax wage rate? How many workers are no longer employed?

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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)