If the labour supply curve is nearly vertical, a tax on labour
1. has a large deadweight loss.
2. will raise small amounts of tax revenue.
3. has little impact on the amount of work workers are willing to do.
4. will raise small amounts of tax revenue and it has little impact on the amount of work workers are willing to do.
Answers is 4. Because at 50% or vertical maximum revenue is raised.
The correct answer is 4. If the labor supply curve is nearly vertical, it means that workers are not very responsive to changes in wages. In this case, imposing a tax on labor will have little impact on the amount of work that workers are willing to do. They will continue to supply a similar quantity of labor even with the tax in place.
Additionally, since the labor supply curve is steep, it implies that the tax burden falls mostly on workers rather than employers. This means that the tax revenue generated from the tax on labor will be relatively small.
It is important to note that the deadweight loss refers to the efficiency loss caused by the tax, which is the difference between the value consumers and producers place on the good and the amount they actually pay or receive after the tax is imposed. In this case, because the tax has little impact and the labor supply curve is nearly vertical, the deadweight loss is likely to be small.