In California, a welfare recipient can earn $ 225 per month without having her benefits reduced. Beyond $ 225, benefits are reduced by 50 cents for every dollar of earnings. Consider Elizabeth, a resident of California, who can earn $ 10 per hour. If she does not work at all, she is eligible for welfare benefits of $ 645.

a. If she works 10 hours, how much are her earnings, how much is her welfare benefit, and how much is her income?

b. After Elizabeth works a certain number of hours, she does not receive any benefit at all. What is that number of hours?

c. Use your answer to parts a and b to plot her budget constraint.

d. Sketch a set of indifference curves consistent with Elizabeth’s participating in the labor market.