assignment4.pdf - Part I 1 It would delay the optimal...

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Part I 1) It would delay the optimal retirement age because the tax will decrease the income and the worker would need to work more in her lifetime in order to enjoy the same amount of consumption. 2) This would decrease the hours worked of retirees because $12,000 will be the income regardless; there would be no incentive to work more since there is no additinal income to work for. 3) a. The hours of work choice does not change because the point on the budget line at 40 hours of work is on the kink w hich gives the most utility for the individual’s budget line. b. The individual would work more (until she reaches 40 hours of work) because at 20 hours, she can increase her utility. 4) Jill will specialize in the labor market and Jack will specialize in the household sector. 5) a. If she will work more than 6 hours, working in the city makes more sense because at 6 hours, the total income for both the city and the farm is the same but after 6 hours, getting income from the city is easier.
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  • Spring '11
  • sarpca
  • Economics, hours of work choice

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