Suppose a single parent can work up to 16 hours per day at a wage rate of $30 per hour and has no non-labour income. An income maintenance program has been developed to assure a minimum level of income for low-income families. A simplified version of this type of a program is one that would give this single parent a $120 no-work grant accompanied by a benefit reduction of a dollar for every dollar earned until no benefit is left to pay. For example, to someone who does not work the program pays $120, while for someone who works 1 hour and earns $30 the benefit is reduced by $30 to $90.

a.) Draw the daily budget constraints with and without program participation for the single individual described above on the plane that has leisure L on the horizontal axis, and money income Y (inclusive of benefits if on a program) on the vertical axis. Carefully mark all the important points of the constraints and indicate the slopes.

b.) Question: At what level of labourmarketearnings does the subsidy end? Round your answer to the nearest integer and submit this integer value for your answer.

c.)

Consider the labour supply incentives of the subsidy if this single parent was working 3 hours per day before the program was introduced. What effect would the program have on his hours worked? If\" Decrease If\" Increase (W No effect r\" We can't tell. Consider labour supply incentives of this program for a single parent who was not working before the program was introduced. How will the program affect his labour market participation? IA Labour market participation is likely to increase IA Labour market participation is likely to stay the same, i.e. the person will most likely stay out of the labour force. A We can't tell from the information given to us A Labour market participation is likely to increase only if the program applies to those over 30 years of age