The government wants to encourage individuals on welfare to become employed. It is considering two possible incentive programs: a. Give firms S2 per hour for every individual on welfare who is hired. b. Give each firm that hires one or more welfare workers a payment of $1,000 per year, irrespective of the number it hires. To what extent is each of these programs likely to be effective at increasing the employment opportunities of welfare workers? Giving firms $2 per hour for every individual on welfare who is hired O A. is likely to be unsuccessful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $2, decreasing employment. O B. is likely to be unsuccessful because the substitution effect from a wage decrease is negative in terms of hours of work. O C. may be successful or may be unsuccessful depending on whether the income effect or the substitution effect from a wage decrease dominates. O D. is likely to be successful because firms hire workers such that the wage rate equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $2, increasing employment. O E. is likely to be successful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $2, increasing employment.
The government wants to encourage individuals on welfare to become employed. It is considering two possible incentive programs: a. Give firms S2 per hour for every individual on welfare who is hired. b. Give each firm that hires one or more welfare workers a payment of $1,000 per year, irrespective of the number it hires. To what extent is each of these programs likely to be effective at increasing the employment opportunities of welfare workers? Giving firms $2 per hour for every individual on welfare who is hired O A. is likely to be unsuccessful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $2, decreasing employment. O B. is likely to be unsuccessful because the substitution effect from a wage decrease is negative in terms of hours of work. O C. may be successful or may be unsuccessful depending on whether the income effect or the substitution effect from a wage decrease dominates. O D. is likely to be successful because firms hire workers such that the wage rate equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $2, increasing employment. O E. is likely to be successful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $2, increasing employment.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The government wants to encourage individuals on welfare to become employed. It is considering two possible incentive programs:
a. Give firms $2 per hour for every individual on welfare who is hired.
b. Give each firm that hires one or more welfare workers a payment of $1,000 per year, irrespective of the number it hires.
To what extent is each of these programs likely to be effective at increasing the employment opportunities of welfare workers?
Giving firms $2 per hour for every individual on welfare who is hired
O A. is likely to be unsuccessful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach
reduces the marginal cost of labor by $2, decreasing employment.
O B. is likely to be unsuccessful because the substitution effect from a wage decrease is negative in terms of hours of work.
OC. may be successful or may be unsuccessful depending on whether the income effect or the substitution effect from a wage decrease dominates.
O D. is likely to be successful because firms hire workers such that the wage rate equals the marginal cost of labor, and this approach reduces the marginal cost
of labor by $2, increasing employment.
O E. is likely to be successful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach
reduces the marginal cost of labor by $2, increasing employment.
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