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Let’s compare the incentives generated by two different types of public programs. The Aid to Families with Dependent Children (AFDC welfare before reform) provides an income subsidy, G, at 0 hours of work, it is taxed away at a rate t when an individual chooses to work. The Earned Income Tax Credit (EITC), on the other hand, consists of a subsidy (at rate s) for individuals working low hours, up to a max credit (C) at a certain level of income, and then is phased out (at a rate t) above a certain income cut off.
a. Draw what an AFDC budget constraint looks like, including a standard budget constraint for comparison.
b. Draw what an EITC budget constraint looks like, including a standard budget constraint for comparison. How does the EITC solve the work disincentive problem created by the AFDC? Refer to income and substitution effects in your answer.
c. The effects of the EITC on labor supply are not positive for all individuals. On a graph, illustrate a case in which the EITC reduces the number of hours worked by an individual. Explain using income and substitution effects.
Assume that output is 1.6% below potential and that the inflation rate is 3.5%. Assume that the Fed has specified the inflation coefficient is á = 0.5 and that the natural real rate of interest is 2%. At what level should the Fed set the federal fund..
q.assume that we have a expenditure function of the form c 220 0.9timesyp where yp is permanent disposable income.
First-degree price discrimination
Sketch graph a standard short-run production function, and identify on it the points where the average product peaks, the marginal product peaks, and the marginal product reaches zero, and the average and marginal product intersect.
Suppose the government is considering the imposition of a unit tax to be levied on beer producers. The view of companies is that this is just one more cost for them to bear.
q. after technological change has taken place in each nation the following table now applies in the absence of
Explain how much should firm produce in order to maximize profit. Illustrate what is maximum profit that firm can generate at output level (your answer in a).
Explain the effects of monetary policies on the economy's production also employment
In order for our nation's capital stock to expand, it will be necessary for...
If this industry acts like a monopolist in the determination of price and output, compute the profit-maximizing level of price and output
Pepsi uses advertising to create the impression that Pepsi is superior to any other soft drink. Pepsi is attempting to:
Assume the demand for plastic surgery is price inelastic. When the price of plastic surgery increases, the number of operations decreases. The percentage change in the price of plastic surgery is less than the percentage change in quantity demanded. ..
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