Problem Set #2 -

Clearly provide (typed or handwritten) your response to each question. This assignment is worth 10 points, graded on both completion and accuracy, and to be turned in at the start of class. Emailed submissions will be deducted 1 point, late submissions will be deducted a letter grade for each day late, and assignments turned in beyond 2 class periods will receive a zero. Complete sentences are not required, but you should show your work and include correctly labeled graphs to support your answer. You may collaborate with peers on this assignment; however, you must turn in your own individual work (i.e. no two submissions should be identical). Responses that sound like AI will not receive credit.

1. Wage Inequality: Explain what effect each of the following proposed changes will have on wage inequality in the US.
2. Indexing the minimum wage to inflation.
3. Increasing the benefit level paid to welfare recipients.
4. Increasing wage subsidies paid to firms that hire low-skill workers.
5. Removing tariffs on imported goods from China.

1. Intergenerational Mobility: Explain what effect each of the following proposed changes will have on intergenerational mobility.
2. Reduce funding for state universities.
3. Implement a federal inheritance tax.
4. Eliminate legacy admissions to elite colleges and universities.
5. Increase taxes among married couples.

1. Compensating Wage Differentials: Consider a competitive labor market that has four different jobs that vary by their wage and risk level. The table below describes each of the four jobs.

Job	Risk (r)	Wage (w)
A	1 5	$3
B	1 4	$12
C	1 3	$23
D	1	$25

All workers are equally productive, but workers vary in their preferences. Consider a worker who values his wage and the risk level according to the utility function: