Susan is a single mother with three children. She can earn
Create a table, patterned after Table 15.3. The first column should show Susan’s choices of how many hours to work per year, up to
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- Sam is a single father with 2 children. He earns $15 per hour and can work up to 1,800 hours per year. If Sam does not earn any income at all, he receives government benefits totaling $20,000 per year. For every $1 of income he earns, his level of government support is reduced by $1. Which of the following statement best describes Sam’s situation? Group of answer choices A. He has no monetary incentive to work. B. He has a monetary incentive to work if he works more than 1800 hours. C. He has a monetary incentive to work as long as he does not exceed 1800 hours D. He has no monetary incentive to work more than 1200 hours.arrow_forwardPresently, there is a minimum and maximum social security benefit paid to retirees. Between these two bounds, a retiree’s benefit level depends on how much she contributed to the system over her work life. Suppose Social Security was changed so that everyone aged 65 or older was paid $12,000 per year regardless of how much she earned over her working life or whether she continued to work after the age of 65. How would this likely affect hours worked of retirees?arrow_forwardShen, who is currently unemployed, is a participant in four welfare programs that offer daily benefits of $10 each to people with no earned income. Each program then curtails its benefits by 50 cents for every dollar of income a recipient earns. Shen's identical twin brother, Sean, is enrolled in an experimental negative income tax program that gives him $40/day in benefits and then taxes him at the rate of 50 percent on each dollar of earned income. Now suppose Shen is offered a job that pays $4/hr, the same wage his brother earns. a. Draw the budget constraint for each twin. Instructions: To earn full credit for this graph you must plot all required points for each curve. 1. Use the line tool (Shen's budget constraint, plot 3 points) to draw the Shen's budget constraint. 2. Use the line tool (Sean's budget constraint, plot 2 points) to draw the Sean's budget constraint. After tax-income ($/day) 98 84 70 56 42 28 14 0 2 4 6 8 10 12 14 16 18 20 22 24 26 Leisure (hrs/day) Tools Shen's…arrow_forward
- Suppose a government program guarantees $ 2,000 a month in income, even for those who do not work at all. However, if the recipient earns income by working, the benefit is reduced by 50 cents for each $1 earned. Which of the following statements is true? This program will redefine the proverty line. While the goal may be to reduce poverty, people rarely respond to incentives. This program will reduce the incentive to work significantly. The goal of this program is to increase the incentive to work, reducing the poverty trap.arrow_forwardA worker has no non-labor income and is earning $14/hour. He maximizes utility by working 40 hours per week. Begin by drawing a graph that illustrates this to be the utility-maximizing solution. The same worker loses his job. He is entitled to unemployment compensation that will pay up to 50% of his weekly earnings. The worker has an opportunity to supplement his unemployment compensation by taking a job that pays $7/hour. Using the same graph, show the worker's new budget line and his utility-maximizing decision as whether to work the new job and how many hours to work. Make sure your graph shows the relevant budget lines and indifference curves.arrow_forwardGovernment introduces a new income guarantee program for low-income families. Consider the program with an income guarantee of $5000 and a benefit reduction rate of 25%. A person can work up to 2,000 hours per year at $15 per hour. a. Draw the person's budget constraint without and with the income guarantee. Label as many things as you humanly can. b. Who would be affected by this program and who would not (use yearly income and number of hours worked to describe the affected and unaffected groups)?arrow_forward
- What makes the Earned Income Tax Credit (EITC) different from other poverty-fighting programs? The amount of the credit is doubled if the head of household is attending college. The tax credit is phased out gradually, rather than at a specific income cutoff point. The amount of the credit is not determined by the number of dependent children in the household. The EITC doesn't require the recipient to pay a minimum amount of income tax in order to receive the credit. It creates less of an incentive to work than other programs.arrow_forwardImagine someone living close to the poverty line in a developing country. This person runs a small business filtering and selling water. Her daughter gets sick, and she has to sell her filtering machine to pay for treatment. Now she makes very little money cleaning fish for a local fishing cooperative. Graph her income today versus her income tomorrow before her daughter got sick. Explain your assumptions with labels on the graph. Then graph what happens to the equilibrium after her daughter gets sick. Hint: this is an example of a trap.arrow_forwardConsider a working mother who is guaranteed an income of $18,000 per year from a combination of working and government assistance. In order to earn $20,000 herself, through work, how many hours would she need to work? $25,000 $20,000 $18,000 $16,000 $15,000 $10,000 $5,000 500 1,000 1,500 2,000 2,500 + Leisure (hours) Labor (hours) Select the correct answer below: 500 labor hours O O labor hours 2500 labor hours O 1000 labor hours Incomearrow_forward
- Shari can work up to 80 hours each week at a pre-tax wage of $20 per hour but faces a 10% payroll tax. Under these conditions, she maximizes her utility by choosing to work 35 hours each week. The government proposes a negative income tax whereby everyone is given $105 each week, and anyone can supplement their income by working. To pay for the negative income tax, the payroll tax rate will be increased to 25%. a. On a single graph, draw Shari's original budget line and her budget line under the negative income tax. b. Show that Shari will choose to work fewer hours if the negative income tax is adopted. c. Will Shari's utility be greater under the negative income tax?arrow_forwardDebbie is about to choose a career path. She has narrowed her options to two alternatives. She can become either a marine biologist or a concert pianist. Debbie lives two periods. In the first, she gets an education. In the second, she works in the labor market. If Debbie becomes a marine biologist, she will spend $15,000 on education in the first period and earn $472,000 in the second period. If she becomes a concert pianist, she will spend $40,000 on education in the first period and then earn $500,000 in the second period.a. Suppose Debbie can lend and borrow money at a 5 percent rate of interest between the two periods. Which career will she pursue? What if she can lend and borrow money at a 15 percent rate of interest? Will she choose a different option? Why?b. Suppose musical conservatories raise their tuition so that it now costs Debbie $60,000 to become a concert pianist. What career will Debbie pursue if the interest rate is 5 percent?arrow_forwardPoverty analysis. Suppose the village of Utopia has 5 households, with expenditure levels [1, 4, 5, 9 and 13]. Suppose the poverty line is 5. Suppose in the nearby village of Dystopia, P0=0.4, P1=0.3 and P2=0.16. As a policymaker which group of population would you prioritize for poverty reduction, with a limited budget? Note that there is no right or wrong answer in this context. What matters is how well you can justify your answer.arrow_forward
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc