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Suppose the Earned Income Tax Credit gives workers 40% of their earnings for earnings up to $15,000 and begins to reduce the credit by 20% for every dollar of earnings above $22,000. For an individual who earns $10 an hour and can work a maximum of 4000 hours in a year
A) Draw the budget constraints before and after this EITC goes into effect. Label the number of hours of work and money income for each kink in the budget constraint.
B)Draw indifference curves before and after the EITC goes into effect for 4 people:
1) A does not work at all before the EITC goes into effect
2) B works 1200 hours
3) C works 2000 hours
4) D works 2500 hours
C) Explain the income and substitution effects of the EITC on these 4 people
D) State how hours of work and money income will change (more, less, no change)
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Some collective bargaining agreements contain “union standards” clauses that prohibit the employer from subcontracting with firms that pay wages below those specified in the agreement. That is, the employer is prohibited from farming out work normall..
What is the combined consumer surplus for the customers who buy the Porsche Spyders when the market price is $835,000?
What is the difference between a positive externality and a negative extarnality? Give three examples of negative externalities. What divergences arise between equilibrium output and efficient output when negative externalities are present?
Assume that the real interest rate becomes much higher in the U.K. relative to the U.S. This will place ____ pressure on the value of the British pound. Also, assume that inflation rates in the U.S. begin to rise relative to inflation rates in the U...
A firm produces 8000 units of output, which it sells for $1.50 each. It produces this output using only labor and capital, and pays $7000 to its labor and $1500 to its capital. The firm's owner feels she could make $4,000 working somewhere else. What..
You are in a class with one other student. It is the end of the semester and final exams are in one week. Your teacher has said the final exam will be graded so that anyone who scores the class average on the final exam will receive a B in the class.
Suppose there are two types of shirts available to Carl: red shirts and black shirts Carl is always willing to exchange three black shirts for one red shirt. What type of preferences is mike exhibiting? Are Carl's preferences convex, strictly convex,..
Two siblings, Sarah and Tom are playing a simultaneous hit and tell game. Sarah can hit Tom or not and Tom can tattle on Sarah or not. Relative to no hitting and no tattling, if Sarah hits Tom, and he tattles they both experience a loss of 10. If Tom..
Define velocity of money and discuss the major determinants of velocity. Assume GDP is currently $14,000 billion per year and the quantity of money is $1,750 billion. What is the velocity of money? The nation collectively holds enough money to financ..
Revenue at a major cellular telephone manufacturer was $1.4 billion for the nine months ending March 2, up 77 percent over revenues for the same period last year. Given this information, is it surprising that the company’s revenue increased when it d..
If your taxable income is $100,000 and state tax rate is 6% and federal tax rate is 34%, how much federal tax do you owe? A truck has a cost basis of $70,000. It has a total life of 150,000 miles with a $10,000 salvage value. You drove 50,000 miles i..
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