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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

Who are the near-poor?

Identify some public policies that can reduce the

level of economic inequality.

Explain how you would create a government

program that would give an incentive for labor to

increase hours and keep labor from falling into the

poverty trap.

The poverty rate would be substantially lower if the market value of in-kind transfers were added to family income. The largest in-kind transfer is Medicaid, the government health program for the poor. Lets say the program costs \(10,000 per recipient family.

a. If the government gave each recipient family a \)10,000 check instead of enrolling them in the Medicaid program, do you think that most of these families would spend that money to purchase health insurance? Why? (Recall that the poverty level for a family of four is about $25,000.)

b. How does your answer to part (a) affect your view about whether we should determine the poverty rate by valuing in-kind transfers at the price the government pays for them? Explain.

c. How does your answer to part (a) affect your view about whether we should provide assistance to the poor in the form of cash transfers or in-kind transfers? Explain.

Suppose there are two possible income distributions in a society of ten people. In the first distribution, nine people would have incomes of \(30,000 and one person would have an income of \)10,000. In the second distribution, all ten people would have incomes of $25,000.

a. If the society had the first income distribution, what would be the utilitarian argument for redistributing income?

b. Which income distribution would Rawls consider more equitable? Explain.

c. Which income distribution would Nozick consider more equitable? Explain.

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