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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Jonathan is a single father with one child. He can work as a server for $6 per hour for up to 1 , 5 00 hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of $ 1 0 , 000 per year. He can work and still receive government benefits, but for every $ 1 of income, his welfare stipend is $ 1 less. Create a table similar to Table 15.4 that shows Jonathan’s options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of Jonathan’s opportunity set with and without government support.

Chapter 15, Problem 2SCQ, Jonathan is a single father with one child. He can work as a server for $6 per hour for up to 1,500

To determine

Jonathon’s total income and his labor-leisure diagram.

Explanation

Given: For every $1 earned, the government will reduce $1 stipend. If $1,800 is earned, then government benefits will reduce by $1,800 (i.e. $10,000 - $1,800 = $8,200)

Jonathon’s working hours and his total income are shown in the table below.

Hours Worked Earnings from work @ $6/hour Government benefits Total income
0 $0 $10,000 $10,000
300 $1,800 $8,200 $10,000
600 $3,600

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