comments_pam204_exam1_fall07-1

comments_pam204_exam1_fall07-1 - Then cash welfare and...

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Comments on PAM 204 Exam #1 #1 and #2) Let me state again that the imaginary budget constraint cannot go through point A. If you find that you have difficulty drawing the imaginary budget constraint correctly then you should draw a big picture, draw an exaggerated difference between budget constraint 1 and budget constraint 2, draw your imaginary budget constraint and plot points A and B before you draw indifference curve 1, and use a ruler. #8) Some students drew a budget constraint where cash welfare and health insurance are unlinked (you receive government health insurance whether or not you are on welfare). That budget constraint is incorrect because cash welfare and health insurance are not unlinked in this problem. Initially an earning disregard program is in place and no government health insurance program is in place.
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Unformatted text preview: Then cash welfare and health insurance are linked so that anyone on welfare also receives government health insurance. #10) Indifference curve 1 must go above the spike in the budget constraint. If indifference curve 1 goes through the spike in the budget constraint, then the single mother would have higher utility initially by working zero hours. That, however, is not the single mother you are asked to depict in this problem. #11a) If you said job training program, food stamps, and in-kind benefits you would only get two of the three points because food stamps are an example of an in-kind benefit. #11b) You were asked to give the values of the two endpoints of the budget constraint so you needed to explicitly state those two (x,y) combinations or clearly indicate them in your diagram....
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This note was uploaded on 03/30/2009 for the course PAM 2040 taught by Professor Lewis during the Fall '07 term at Cornell University (Engineering School).

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