Question 1 (15 points) Tom earns $15 per hour for up to 40 hours of work each week. He faces a 20 percent tax rate and pays $4 per hour in child care expenses for each hour he works. Tom also receives $80 in child support payments each week. If he is required to work overtime he is paid $30 per hour for every hour in excess of 40 hours. However, a new law passed in 2004 prohibited any overtime work. a Draw Tom's weekly old budget constraint, showing the overtime premium after 40 hours of work. b. Draw the new budget constraint after overtime work is prohibited. c. Analyze if Tom is better off under the change in the law. Is there any case Tom is worse off? Explain. Question 2 (15 points) Employ a diagram to show an individual's leisure-income choices before and after a wage rate decrease. Isolate the income and substitution effects, indicate whether each increases or decreases hours of work, and use the two effects to explain the overall impact of the wage decline on hours of work Is your worker on the upward-sloping or the backward-bending portion of the labor supply curve? Question 3 (15 points) Suppose a single parent can work up to 16 hours per day at a wage rate of $10.00 per hour. Various income maintenance programs have been developed to assure a minimum level of income for low-income families, such as Aid to Families with Dependent Children (AFDC). One of the problems with AFDC is that benefits were reduced by $1 for every dollar earned, which creates a no-work incentive for those who are eligible. An alternative income maintenance program is Temporary Assistance for Needy Families (TANF), which also offers a no-work benefit but a smaller reduction in wages for every dollar earned. The subsidy ends when the money income with program participation equals the money