1) What are efficiency, producer surplus, worker surplus, and total gains from trade?
2) Why would we expect regional wage levels to converge? What happens to total gains from trade as regional wages converge?
3) How do payroll taxes affect labor markets (i.e., equilibrium employment, wage paid by employer, wage received by worker, producer surplus, worker surplus, total gains from trade, incidence of tax)?
4) Does the incident of tax (who ultimately pays the tax) depend on who the tax is imposed on? Explain.
5) In what situations would we expect workers to pay most of the payroll tax? Explain using the concept of elasticity.