Question

3. Suppose Jack’s wage rate is $20 and that he can produce $10 per hour of household “goods”. Suppose Jill’s wage rate is $30 and that she can produce $15 per hour of household “goods”. Who should specialize in the market sector? Suppose now, Jack’s wage goes up to $25 per hour. How does this affect the answer?

Answer #1

3. Suppose Jack’s wage rate is $20 and that he can produce $10
per hour of household “goods”. Suppose Jill’s wage rate is $30 and
that she can produce $15 per hour of household “goods”. Who should
specialize in the market sector? Suppose now, Jack’s wage goes up
to $25 per hour. How does this affect the answer?
4. Suppose the government grants $2500 per child to households
that have more than 2 children. How would this affect
fertility?

1. Continuing from the questions on Homework 1, suppose the
following Earned Income Tax Credit (EITC) scheme is put in place.
For those whose earned income is less than $500 per week the
government gives 40 cents on every dollar earned. For those who
earn more than $500 the government gives them $200 per week. Based
on the answers to question 2 of the first homework (i.e. ignore
overtime), how does this affect the labor supply and earnings of
Johnny...

Jenny has preferences given by the utility function U(C; L) = C
2L so that the slope of her indi§erence curve is C 2L : Johnny has
the same preferences we saw in the class example (i.e. U(C; L) = CL
so the slope of his indi§erence curve at any point is C L
1.Continuing from the questions on Homework 1, suppose the
following Earned Income Tax Credit (EITC) scheme is put in place.
For those whose earned income is...

With an initial wage rate of $15 per hour, Thomas works 35 hours
per week and leisures the remaining 75 hours. When his wage
increases to $20 per hour he works 45 per week and when the wage
increases to $25 heworks 40 hours per week. What is Thomas’ labor
supply elasticity as his wage increases from $15 to $20 and then
from $20 to $25? What does this value tell you about the shape of
his labor supply curve...

Wage rate is $10 per hour for a consumer, and he is choosing
earning of $10 per hour and taking leisure of 1 hour together.
a. Derive the mathematical equation and
draw the corresponding graph for daily income-leisure
constraint.
b. Draw the corresponding indifference
curve between earning and leisure.
c. How many hours will this
consumer work and how much will this consumer earn?

In an hour, Sue can produce 40 caps, or 4 jackets and Tessa can
produce 80 caps or 4 jackets. Would Sue and Tessa have any
incentive to specialize? Explain your answers. If Sue and Tessa
specialize in producing the good in which they have a comparative
advantage, and they trade 1 jacket for 15 caps, who gains from the
specialization and trade? Explain your answers. Suppose that Tessa
buys a new machine for making jackets that enables her to...

Suppose that the government raises the permissible minimum wage
to $15 per hour.
Which of the following describes a secondary effect that will
likely result from this action?
a The rise in the minimum wage will lead to a reduction in the
employment of low-skill workers.
b The rise in the minimum wage will lead to a drastic fall in
the poverty rate in the country.
c The rise in the minimum wage will improve the training
opportunities available to...

William receives $100 in dividends each week. He earns an hourly
wage of $20 per hour. Assume that there are 168 hours available to
William each week. William decides to work 42 hours per week at his
current wage. When his wage increase to $25 per hour, William
elects to work 37 hours per week. Use a diagram to show William’s
initial combination of work hours and consumption, his new
combination of work hours and consumption after the wage increase,...

Suppose that you have a job with a wage of $25 per hour. The job
is extremely flexible: you
can choose to work any number of hours from 0 to 2,000 per year.
The income tax system
is as follows.
•Income up to $10000: no tax.
•Income from $10000 to $30000: 20% tax rate.
•Income from $30000 up: 30% tax rate.
(a) Draw a graph in leisure hours/consumption space, showing
your opportunity set with
and without the tax system. Label...

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...

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