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Chapter 15: Q.32 (page 378)

Exercise 15.2 and Exercise 15.3 asked you to

describe the labor-leisure tradeoff for Jonathon. Since,

in the first example, there is no monetary incentive for

Jonathon to work, explain why he may choose to work

anyway. Explain what the opportunity costs of working

and not working might be for Jonathon in each example.

Using your tables and graphs from Exercise 15.2 and

Exercise 15.3, analyze how the government welfare

system affects Jonathan’s incentive to work.

Short Answer

Expert verified

Jonathan may work with future expectation of earning a high income also developed a skill set and work experience else without work, it's not even income.

Step by step solution

01

Step 1. Meaning

Opportunity cost of a decision can be referred to as the cost of giving up or sacrificing the next best alternative.

02

Step 2. Explanation

The opportunity cost of working is giving up on government benefits. The opportunity cost of not working is not earning a high level of income.

03

Step 3. Explanation

As the information mentioned in table 1, because Jonathan's is earning higher without working, so he does not have any incentive to work.

04

Step 4. Explanation 

As the information mentioned in table 2. the optimal number of hours to work is 300 hours. because he has an incentive to work with only lessor working hours.

If he workd for 1500 hours, he earns $16300.

If he stays at home, he earns $10000 &

work for 300 hours he earns $22260.

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Most popular questions from this chapter

Identify some public policies that can reduce the

level of economic inequality.

What are some reasons why a certain degree of

inequality of income would be expected in a market

economy?

Jonathon is a single father with one child. He can work as a server for \(6 per hour for up to 1,500 hours per

year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of \)10,000 per year.

He can work and still receive government benefits, but for every \(1 of income, his welfare stipend is \)1 less. Create

a table similar to Table 15.4 that shows Jonathan’s options. Use four columns, the first showing number of hours

to work, the second showing his earnings from work, the third showing the government benefits he will receive,

and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of

Jonathan’s opportunity set with and without government support.

Who is included in the top income quintile?

Consider two of the income security programs in the United States: Temporary Assistance for Needy Families (TANF) and the Earned Income Tax Credit (EITC).

a. When a woman with Children and very low income earns an extra dollar, she receives less in TANF benefits. What do you think is the effect of this feature of TANF on the labor-supply of low-income women? Explain.

b. The EITC proves greater benefits as low-income workers earn more income (up to a point). What do you think is the effect of this program on the labor-supply of low-income individuals? Explain.

c. What are the disadvantages of eliminating TANF and allocating the savings to EITC?
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