2. Universal Basic Income (UBI) is a policy proposal in which everyone receives an income necessary...

 

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2. Universal Basic Income (UBI) is a policy proposal in which everyone receives an income necessary to live from the government. Consider two policy proposals: 1) A minimum wage of $7.50/hr and a $20,000 UBI stipend. 2) A minimum wage of $15 and a $10,000 UBI stipend. Suppose you have preferences over consumption and leisure are described by the utility function u(C, L) = C1/ 12/3. Assume you have 4000 hours per year to split between consumption and leisure. a. (10 points) Suppose you have a minimum wage job and the flexibility to choose your hours. Solve for your optimal hours worked and consumption under each plan. b. (5 points) As a worker with a minimum wage job, which plan would you prefer? 2. Universal Basic Income (UBI) is a policy proposal in which everyone receives an income necessary to live from the government. Consider two policy proposals: 1) A minimum wage of $7.50/hr and a $20,000 UBI stipend. 2) A minimum wage of $15 and a $10,000 UBI stipend. Suppose you have preferences over consumption and leisure are described by the utility function u(C, L) = C1/ 12/3. Assume you have 4000 hours per year to split between consumption and leisure. a. (10 points) Suppose you have a minimum wage job and the flexibility to choose your hours. Solve for your optimal hours worked and consumption under each plan. b. (5 points) As a worker with a minimum wage job, which plan would you prefer?