Question

Policy makers devise a welfare program where benefits are reduced when additional income is received. If a person on welfare does not work at all, they will receive $400 a month. But, for every dollar they earn, benefits will be reduced by 30 cents. Suppose that the hourly wage rate is $8.

(a) (3 points) If a person works for 120 hours in a month, what will the total income be?

(b) (3 points) How many hours must a person work in order to receive no benefits?

(c) (3 points) What is a potential benefit of implementing an earned income tax credit welfare program instead of this one?

Can you please answer all 3?

Answer 1

son doesn't work he receives you a month al wage rate (wl=48 1 hour for each dollar earn 30 cents are reduced from benefit det h be the number of hours worked Total Income = wht You-0.3 (who [Income = 0.7 wht you 1 for h= 1204 w28. - Total Incomes 0.7187 (120) + you = 1072 b) for receiving no benefits 10o = 0.3 wh you = 0.31 8%) h La chroth] => [h= 1000 - 500 hrs] c) In the cament welfare program the people I have less incentire to be motivated for work as they are getting worth to hours of money as welfare benefit. In earned income tax credit people will be motivated to work for more hours.