Question

Suppose the government levies a payroll tax on employers to fund a workers' compensation program. The payroll tax shifts the labor demand curve to the _____; the workers' compensation program shifts the labor supply curve to the _____.

a. right; right

b. left; left

c. right; left

d. left; right

Answer 1

The payroll tax shifts the labor demand curve to the left; the workers' compensation program shifts the labor supply curve to the right. The correct answer is d. left; right.

Step-by-step explanation:

When the government levies a payroll tax on employers to fund a workers' compensation program, it increases the cost of hiring workers for employers. This leads to a decrease in the demand for labor and a leftward shift in the labor demand curve. On the other hand, the workers' compensation program provides financial support to workers who are injured on the job, making it less risky for individuals to supply labor. This results in an increase in the supply of labor and a rightward shift in the labor supply curve.