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Unformatted text preview: 1 Name_______________________ Take home/ In class exam Economics 301 Fall 2011 On Thursday October 20 th you will be given approximately 20 minutes do one of the following 4 questions in class. In class you will have to do it closed notes by yourself. You may use a calculator as long as it is not a graphing calculator or a cell phone. Before Thursday October 20 th you may use whatever resources you want (besides people with Ph.D.s) to answer the questions. You may work in groups etc. You may ask me clarifying questions, but I will not help you with the problems. I will take clarifying questions during class on Tuesday October 18 th . Dont get discouraged. These questions are meant to be very challenging. You will need to show work. If you do not show work no credit will be given. You may receive partial credit if you show work but end up with the incorrect answer. On the class version of the question I put how many points each part is worth. There is also a copy of this on the class website. 2 1. A subsidy (welfare) program with an increase in the basic benefit. Explain the following in words and show details in graphs (labor/leisure graphs). Suppose there is the typical income maintenance program where people receive the following type of subsidy: S=b-tI, where S is the total subsidy, b is the basic benefit (this is how much someone receives if they do not work at all), I is income, and t is factor that reduces your subsidy if as you earn income: BC w/o a subsidy: I=w(T-l) where T is total time BC with a subsidy: I+s=w(T-l). If you substitute in this would become: I+b-tI=w(T-l) (note: that on most peoples BC they start to receive zero subsidy) Show and explain what happens for the following three people if the basic benefit increases (from b to b). Assume labor is a normal good....
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This note was uploaded on 12/27/2011 for the course ECON 302 taught by Professor Ahmad,y during the Fall '08 term at Wisc Whitewater.
- Fall '08