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Suppose day-care centres charge working parents for each hour their children spend at the centres (no fixed costs of care). Suppose, too, that the federal

Suppose day-care centres charge working parents for each hour their children spend at the centres (no fixed costs of care). Suppose, too, that the federal government passes subsidy legislation so that the hourly cost per child now borne by the parents is cut in half. Would this policy cause an increase in the labour supply of parents with small children?

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