Question

Assume that a welfare program pays $200 per week if a person does not work and reduces the welfare benefit of dollar for dollar with earnings. Assume that the individual does not have any other non wage income. Also assume that the individual has a market wage rate of $10/ hour. Assume a maximum of 120hours of leisure per week (T= 120/ week).

Suppose that in the absence of the program, the person would work 20 hours per week. What does the program have on the individuals hours of work? USE A GRAPH (NO EXCEL) TO SHOW ILLUSTRATE THE ANSWER.

Answer #1

Assume the gross wage of w=$10 per hour and gross non-wage
income YN = $5000 per year. Assume a maximum of 6,000 hours of
leisure per year (T= 6000 per year ), so that full income for the
worker is $65,000.
Draw the budget constraint under each of the following taxes and
transfer schemes.
1. A welfare program that pays $8,000 per year if the person
does not work and reduces the welfare benefit dollar for dollar
with earnings (100%...

1) John participates in a welfare program which pays him $6,000
dollars. He can work but he hose 50 cents of the welfare check for
every dollar he earns over $5,000. How much wage income will he
have to earn to escape poverty if the poverty line for him is
$17,000 per year?
A) $14,000 B) $17,000 C) $11,000 D) $12,000
2) John Doe participates in a welfare program which pays him
$6,000 dollars. He can work but he loses...

Solving Moral Hazard by Lowering the Benefit Reduction
Rate
An individual can earn $15 per hour if he or she works. Assume
an individual can work up to 200 hours in a month, or not work at
all and consume 200 hours of leisure. Draw the budget constraints
that show the monthly consumption-leisure trade-off between the
following three welfare programs.
a. The government guarantees $900 per month in income and
reduces that benefit by $1 for each $1 of labor...

Question ID 2-22: Consider a person whose happiness from the
consumption of goods (C) and time away from paid work (L) is
characterized by the function U = C2L.(C squared L). When working
they can earn $10 per hour and have 10 hours per day available for
work. They receive a gift of $5 per day regardless of how much they
work. Answer the following: (a) What is their reservation wage? (b)
What is their optimal choice of work time...

Suppose that a worker’s utility (i.e., preferences) with respect
to total income (Y) and hours of leisure time per week (LT) can be
represented by the following Cobb-Douglas
utility function:
U = Y0.4 ∙ LT0.6 (note: A=1; α=0.4; β=0.6)
Assume that the market wage is $25 per hour of work (H), and
his/her non-labor income is $300 per week. The worker has 70 hours
per week to allocate between labor market activity and leisure time
(i.e., T = 70).
Given...

Cost-Benefit Analysis Problem:
Imagine an individual who is working 20 hours a week for $10 per
hour, because, although she would prefer to work 40 hours a week at
that wage, she is unable to find full-time employment. Further
assume that there is a proposal to reduce the speed limit on
inter-state highways, and this would result in the individual
spending 1 hour a week more driving. In conducting a cost- benefit
analysis of the proposal, should this hour be...

Lauren does not work and receives $500 per week in dividends and
interest from her vast financial empire. She is just as happy if
she works one hour per week to raise her income to $520, or works
two hours per week to raise her income to $544, or works three
hours per week to raise her income to $572, or works four hours per
week to raise her income to $604, as she is when she does not work...

Suppose a single parent can work up to 16 hours per day at a
wage rate of $10.00 per hour. Various income maintenance programs
have been developed to assure a minimum level of income for
low-income families. Aid to Families with Dependent Children (AFDC)
was established with the Social Security Act of 1935. The family
was given an income subsidy depending on family size. Under this
program, the family’s benefit was reduced by $1 for every dollar
earned. Suppose the...

Sarah has the following utility function and has a market wage
of $10 per hour, and can work upto 2000 hours per year.
U = 100* lnC + 175* lnL ; Where C is the consumption and L is
the leisure
A) Determine the utility maximizing levels of C and L for Sarah.
Also, determine the corresponding maximum level of utility of
Sarah.
Now assume that she is subject to a TANF program that features a
benefit guarantee of $5000...

John’s utility function is represented by the following: U(C,L)
= (C-400)*(L-100), where C is expenditure on consumption goods and
L is hours of leisure time. Suppose that John receives $150 per
week in investment income regardless of how much he works. He earns
a wage of $20 per hour. Assume that John has 110 non-sleeping hours
a week that could be devoted to work.
a.Graph John’s budget constraint.
b.Find John’s optimal amount of consumption and leisure.
c.John inherits $300,000 from...

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