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Suppose That All Workers Place a Value on Their Leisure

Question 67

Multiple Choice

Suppose that all workers place a value on their leisure of 40 goods per day.The production function relating output per day Y to the number of people working per day N is
Y = 200N - N2
And the marginal product of labor is
MPN = 200 - 2N.
A 20% tax is levied on wages.In terms of lost output,what is the cost of the distortion introduced by this tax?


A) 25
B) 75
C) 150
D) 225

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