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Governments generally limit the amount of the childcare subsidy. For example, in Washington State, the 2015 maximum subsidy for an infant is $31.47 per day.

Governments generally limit the amount of the childcare subsidy. For example, in Washington State, the 2015 maximum subsidy for an infant is $31.47 per day. A binding limit on the subsidy creates a kink in the budget constraint. Show how a limit changes the analysis in the Challenge Solution. Assume the individual's preferences are such that she consumes child-care beyond the subsidy limit

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