A country has the following welfare program for helping the poor. Each personhas the right to a benefit of G euro per month, but for each euro someone earns,the benefit is reduced with t euro. Suppose that G = 600 and t = 0.4. ConsiderBetty, who can work for an hourly wage of 10 euro. A ssume that a month has30 days (such that total number of hours T = 720).(a) What is the break-even point of the welfare program, in terms of earningsand hours worked?(b) What is the mathematical expression of the budget constraint under thewelfare program? Sketch Betty's budget constraint with and without theexistence of the welfare program.Now suppose that Betty's utility of income (in euro's) Y and leisure (in hours)L equalsU = Y}L!(c) What is Betty's optimal amount of leisure if there would be no welfareprogram?

Non -Labor income = G = 600 Tax = 0.4 /euro Total Working hours/day = 24 Wage = 10 $/h

Answered: A country has the following welfare…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.3P

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