Consider an employee who does not receive employer-based health insurance and must divide her $1,000 per week in after-tax income between health insurance and "other goods."

(a) Draw this worker's budget line if the price of health insurance is$200 per week and the price of "other goods" is $100 per week.

(b) On the same graph as in (a), illustrate how the budget linewould change if the employer agreed to give thisemployee$200worth of health insurance per week (undercurrent tax laws, this form of compensation is nontaxable).

(c) Would this employee be better or worse off if, instead of the health insurance, the employer gave her a $200 per week raise that was taxable at a rate of 25 percent? Explain.