Consider Tina's optimal labor and leisure decision. She earns a wage of $10 an hour and can work up to 80 hours a week. Tina has a utility function over consumption spending and leisure equal to: (, ) = 20 1/ 2 + 5

Suppose that the government passes new legislation, introducing an earned income tax credit with the following structure:

For the first $250 in weekly earned income, an individual receives an EITC payment of $0.40 per dollar of earnings, up to a maximum of $100.

Between $250 and $350 of earnings per week, the EITC payment is flat at $100.

From $350 to $750 of earnings per week, the EITC payment falls by $0.25 per dollar earned until it reaches zero.

A. Given Tina's weekly income prior to the passage of this new legislation, how do you expect Tina's supply of labor to change in response to the EITC? Explain your answer.

B. Will all workers respond to the EITC in the same way? Explain all possibilities.