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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

Imagine that the government reworks the welfare policy that was affecting Jonathan in question 1, so that for each dollar someone like Jonathan earns at work, his government benefits diminish by only 30 cents. Reconstruct the table from question 1 to account for this change in policy. Draw Jonathan’s labor-leisure opportunity sets, both for before this welfare program is enacted and after it is enacted.

To determine

Jonathon’s total income and his labor-leisure diagram when government benefits diminish.

Explanation

Given: For every $1 earned, the government will reduce by 30 cents stipend.

The following table shows a policy where only 30 cents in government support is pulled right back for every $1 of income earned. Jonathon’s labor-leisure diagram is shown in the figure following the table.

Hours Worked Earnings from work @ $6/hour Government benefits Total income
1500 $9,000 $7,300 $16,300
1200 $7,2...

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