just subpart (d) please. thank you In New Zealand, the Family Tax credit (FTC) gives a working mother with onechild $113 if her weekly earnings are between $0 to $820. For each additional dollarearned above $820, the tax credit decreases by 25 cents. Consider a working motherwith one child in New Zealand. Her wage rate is $30 per hour, and the maximumhours she can work is 80 hours per week.a) Draw her budget line without the FTC. What is the slope of the budget line?b) Draw her budget line with the FTC. What are the slopes of the new budget line?(Please specify the slopes of each segment of the budget line.)c) Where does the new budget line intersects with the initial budget line? What areher income and hours of work at the intersection?d) Suppose the working mother works 25 hours per week under the original budgetconstraint without the FTC. Will she work more, less, or ambiguous after theintroduction of the FTC? Draw a figure and explain you answer in terms ofincome and substitution effect.

For part (d) of the question, we're considering the behavior of a working mother who is currently…

Answered: In New Zealand, the Family Tax credit…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 9PA

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Mark can work up to 80 hours each week at a pre-tax hourly wage of $20 but faces a constant 20 percent tax on his earnings. Thus, Mark maximizes his utility by choosing to work 50 hours per week. The government proposes a negative income tax whereby everyone is given $300 per week and anyone can supplement their income further by working. To pay for the negative income tax, tax on earnings will be increased to 50 percent. On a single graph, draw Mark's original budget line and his budget line under the negative income tax. Show that Mark will work fewer hours if the negative income tax is implemented Will Mark's utility be greater under the negative income tax? Discuss your answer.
What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $12 per hour, there are 110 hours in the week to work, and she receives nonlabor income of $300 per week?
Monthly income = salary of 1200 and a gov welfare payment of 800 Y= 2000 Needs to use this income for food and goods quantity of food = qf quantity of goods= qd Price of food = 1 Price of goods = 2 1) Draw budget line, qf on vertical axis and qd on horizontal one 2) The welfare payment is now given in the form of food stamps. 1200 can be spent on food and other goods, food stamps can only be used to purchase food. The prices of food and other goods remain the same. budget line with the food stamps, measuring on the vertical axis and on the horizontal axis. Label all critical points on the budget line. Show you are at least as well off under the cash welfare payment as under the food stamps. Here is how: Depict the budget lines in 1. and 2a. in a single diagram and superimpose indifference curve(s) to show the optimal consumption bundle(s). You will need two such diagrams to illustrate two different cases: optimal consumption bundle is the same under the cash welfare…
Suppose that the owner of Boyer Construction is feeling the pinch of increased premiums associated with worker’s compensation and has decided to cut the wages of its two employees (Albert and Sid) from $25 per hour to $22 per hour. Assume that Albert and Sid view income and leisure as “goods,” that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Draw each worker’s opportunity set for each hourly wage. At the wage of $25 per hour, both Albert and Sid are observed to consume 12 hours of leisure (and, equivalently, supply 12 hours of labor). After wages were cut to $22, Albert consumes 10 hours of leisure and Sid consumes 14 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $22 per hour. How can you explain the seemingly contradictory result that the workers supply a different number of labor hours? (LO2, LO3, LO7)
Jones, without a job or job prospects, has been on social assistance for the past four months. Social assistance pays a basic benefit of $600 a month with a benefit reduction rate of 75 percent for earned income. Her welfare benefit is given as B = 600 - 0.75E, where E represents monthly earnings. Jones has just been offered a part-time job working 5 hours a day, 5 days a week, earning an hourly wage of $11. Sketch a budget constraint for Jones given the social assistance scheme in place and the wage rate available for part time work. How much income would she earn if she accepted the job? Would Jones still be on social assistance if she took the job? Draw the budget constraint.
Consider your decision about how many hours towork.a. Draw your budget constraint assuming thatyou pay no taxes on your income. On the samediagram, draw another budget constraintassuming that you pay a 15 percent income tax.b. Show how the tax might lead you to work morehours, fewer hours, or the same number of hours.Explain.
Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C - 200) * (L - 80) This utility function implies that Shelly’s marginal utility of leisure is C - 200 and her marginal utility of consumption is L - 80. There are 168 hours in the week available to split between work and leisure. Shelly earns $5 per hour after taxes. She also receives $320 worth of welfare benefits each week regardless of how much she works. a. Graph Shelly’s budget line. b. What is Shelly’s marginal rate of substitution when L = 100 and she is on her budget line? c. What is Shelly’s reservation wage? d. Find Shelly’s optimal amount of consumption and leisure.
Akua gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 110 hours. Her utility function is U (C, L) = C × L. Akua receives 660 GHS each week from her great-grandmother—regardless of how much she works. a. What will be Akua’s marginal rate of substitution. b. What will be Akua’s reservation wage? (Explain in detail)
Tatum is a mother of Anny (1 year old). Tatum derives utility from income Y (i.e. a disposable income that she can spend on consumption goods other than childcare) and leisure L according to the utility function U(Y,L)=Y*L . She has non-labour income of $300 per day. Her time endowment is 16 hours per day that can be spent either on Leisure (which mostly consists of caring for Anny) or labour market work. If Tatum works she has to leave Anny in the child care. Tatum’s wage is $30 per hour, while the childcare cost $5 per hour. Tatum only uses childcare when she works. Compute how many hours Tatum will work under these circumstances. Round your answer to the second decimal point.
One proposal for reforming the welfare system is to create a negative income tax. Under the negative income tax, each person is entitled to a grant of G dollars permonth. For every dollar the person earns, the grant is reduced by t dollars. a. Suppose G = 200 and t = 0.40. Consider an individual whose hourly wage = $10. There are 30 days in a month, so the total allotment of T = 720. Sketch the budgetconstraint before and after the introduction of the negative income tax. b. Would people work more or less with the implementation of this system? c. What if t = 100%? Explain!
Suppose that a person has 2000 hours to allocate each year between leisure and work. a. Derive the equation of his budget constraint given an hourly wage of $(15)/hour. b) Graph his budget constraint line based on the equation you derived in part a. (Consumption (C) on the vertical axis and leisure (L) on the horizontal axis). Please make sure to include the value for the vertical and horizontal intercepts. c) Now suppose that the local government introduces an income guarantee program for single parents in which the income transfer is $10,000 per year if an individual does not work during that year (this dollar amount represents the benefit guarantee). If the individual decides to work, this transfer program imposes a 100% benefit reduction rate (e. g.. each additional hourly wage earned is reduced by 100%). Derive the new budget constraint equation that corresponds to this scenario. d) Draw the budget line that corresponds to the new scenario on a new graph. (Consumption (C) on the…
Sharmila has no other source of income except for her job at a cozy restaurant in a well-known university that pays Rp.5/hour. Since she is such a good worker, her boss lets her choose how many hours she wants to work each week as long as it is between one and 20 hours. (a) Graph Sharmila’s weekly budget constraint. (b) How many hours must Sharmila work to cover her weekly rent and food expenses which total Rp.75/week? (c) If Sharmila get a raise to Rp.7.5/hour but chooses to still work only enough to cover her rent and food expenses, now how many hours must she work?

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