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Mary has a job where she earns $20 per hour and Mary has a non-wage income of $0 per day. Now Mary gets a
Mary has a job where she earns $20 per hour and Mary has a non-wage income of $0 per day. Now Mary gets a pay cut. She now earns $10 per hour, and Mary still has a non-wage income of $0 per day. A. What is the slope of Mary's new budget constraint? B. As a response to the decrease in her wage, Mary changes the number of hours she spends working. Assuming that the income effect dominates, sketch the change in Mary's labor-leisure decision and indicate the income and substitution effects on the graph below. Label all relevant points and curves. C. Suppose Mary now qualifies for an income maintenance program. She earns a benefit of $50 if she doesn't work that day. If she does work, her check from the government is reduced by the benefit reduction rate of 0.25. a) Mary decides to work for 10 hours a work day. Supposing Mary only works for 5 days a week, how much money is she earning from the government every month (assume the month has a full four weeks) b) How many hours a day must she work to reach the break-even level of income?
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A The slope of Marys new budget constraint represents the rate at which her leisure measured in hours can be traded for consumption income The slope of the budget constraint is equal to the negative o...Get Instant Access to Expert-Tailored Solutions
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