Draw an earnings-leisure diagram

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Question: The Temporary Assistance for Needy Families (TANF) has two main features: a basic benefit guarantee (basic benefit) and benefit reduction rate (take-back rate). Draw an earnings-leisure diagram where the market wage rate is $10, the basic benefit is $3,000 and the take back rate is 50%. What is the break-even point where the individual is as well off in the TANF program as she is in the labor market without TANF participation? Next consider a revision to the TANF program where the basic benefit is reduced to $2,400 and the take-back rate is reduced to 40%. For persons, who have worked in the original TANF program, does the revised program encourage or discourage work compared to the original program. Explain.

Reference no: EM132198076

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