Thank you this was super helpful! Can you possible answer this question also:

1. Suppose County X (see question 3a above) decides to change its welfare program in

the following way: If an eligible mother does not work, she receives $40 per day. If she

decides to work she will continue to receive $40 per day until her earnings reach $2

0 per day (at which point she has a daily income of $60); that is, she can "keep" both any

earnings and her daily subsidy of $40 until her earnings reach $20. After

earnings go above $20, she receives nothing from the welfare department (her subsidy is reduced to zero).

(a) Draw both the "old" the budget constraint in Country X and the new one created by this new program for a woman who can earn $5 per hour and has 16 hours of available time per day.

(b) Comparing the two constraints in 4(a), what do you expect to happen to the labor force participation rate among welfare mothers in County X as a result of the new program?

(c) Analyze the effects on hours of work for welfare mothers in County X who would NOT have worked before the new program.

(d) For potentially eligible mothers in County X who would have worked with the old welfare system (and would therefore not have received welfare), what effect will this new program have on their work incentives?