*5.3 How could the government set a smaller lump-sum subsidy that would make poor parents as well...

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*5.3 How could the government set a smaller lump-sum subsidy that would make poor parents as well off as with the hourly childcare subsidy yet cost the government less? Given the tastes shown in the Challenge Solution figure, what would be the effect on the number of hours of childcare service that these parents buy? Are you calculating a compensating variation or an equivalent variation (given that the original family is initially at e1 in the figure)?

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