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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.
A corporation is considering spending $3 million for a new stamping press which will save $550,000 per year (repairs, downtime, etc.) over its 7-year life. At the end of seven years, the machine could be sold for $1.8 million. An alternative is to sp..
During the first 13 weeks of the t.v season the Saturday evening 8;00pm-9:00pm audience proportions were recorded as ABC 29% CBS 28% NBC 25% and independents 18%. a sample of 300 homes two weeks after Saturday night schedule revision yielded the foll..
Elucidate how changes in government spending also taxes positively do or negatively affect the economy's production also employment.
Wheat farmers will receive total revenues from consumers and the government totaling
Consider the competitive (private) market for widgets described by the following marginal benefit (MB) and private marginal cost (PMC) curves: MB = 100? 0.1Qd PMC = 4 + 0.06Qs, where Qs and Qd vary from 0 to 1000. Calculate both the consumer and prod..
What is the profit maximizing price? a) 810 b) 750
What will the new Lerner Index be after some time with the new demand curve and market price of 30? What firms survive the new demand curve in the industry and why?
Explain why study pure competition if actual purely competitive markets do not exist? What can we learn from highly competitive markets. Briefly discuss.
In which directions are they pushing or pulling the U.S. economy? Also, do you think the gap between real GDP and potential GDP will widen or narrow?
Where individual meters have been installed, water usage has declined 10 to 40 percent. Elucidate that drop, referring to price and marginal utility.
An improvement in production technology for a specific good will cause a(n):
Suppose a country makes commodity A and B with capital and labour with constant returns to scale technology. When the country goes from autarky equilibrium to trade equilibrium with its trading partner, the price of A rises and price of B remains sam..
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