Suppose that the federal government's welfare program pays $5,000 for the first five months of earnings, and 50% reduction thereafter. If this worker earns 2,000 dollars per month, assuming 12 months per year, answer the questions.

a. Construct the yearly income-leisure constraint both graphically and equations.

b. Compute the break-even level of income and leisure (the level of income that makes the welfare = 0).

c. Compute the level of income when the leisure is 8 months. What is amount of earning income and what is the amount of welfare benefit?

d. Compute the level of income when the leisure is 6 months. What is amount of earning income and what is the amount of welfare benefit?

e. Compute the level of income when the leisure is 1 month. What is amount of earning income and what is the amount of welfare benefit?

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Given that Federal governments welfare program pays 5000 for the first five months of earnings 50 re... View the full answer