Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 23, Problem 4DQ
To determine
The life time income distribution.
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7. LO 2, 4 Suppose that a consumer can earn a
higher wage rate for working overtime. That is,
for the first q hours the consumer works, he or
she receives a real wage rate of w, and for hours
worked more than q he or she receives w, where
W2>W1. Suppose that the consumer pays no
taxes and receives no nonwage income, and he or
she is free to choose hours of work.
(a) Draw the consumer's budget constraint, and
show his or her optimal choice of consump-
tion and leisure
(b) Show that the consumer would never work
hours, or anything very close to q
Explain the intuition behind this.
(c) Determine what
hours.
happens if the overtime
wage rate w2 increases. Explain your results
in terms of income and substitution effects.
You must consider the case of a worker who
initially works overtime, and a worker who
initially does not work overtime.
%24
A household with income that is two-thirds of the poverty threshold has ratio of income to poverty of
O 0.67.
O 1.50.
O 3.20.
O0.23.
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(a) unemployment in the originating nation, (b) remittances
* How might the output and income gains from immigration
shown by the simple immigration model be affected by
themployment in the originating nation, (b) remittances
inmigrants to the home country, and (c) backflows of
migrants to the home country? LO23.3
migrants to the home country? LO23.3
shown by the simple immigration model be affected by
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Similar questions
- PROBLEMS 1. Workers are compensated by firms with “benefits” in addition to wages and salaries. The most prominent benefit offered by many firms is health insurance. Suppose that in 2000, workers at one steel plant were paid $20 per hour and in addition received health benefits at the rate of $4 per hour. Also suppose that by 2010 workers at that plant were paid $21 per hour but received $9 in health insurance benefits. LO17.1 By what percentage did total compensation (wages plus benefits) change at this plant from 2000 to 2010? What was the approximate average annual percentage change in total compensation? By what percentage did wages change at this plant from 2000 to 2010? What was the approximate average annual percentage change in wages? If workers value a dollar of health benefits as much as they value a dollar of wages, by what total percentage will they feel that their incomes have risen over this time period? What if they only consider wages when calculating their incomes?…arrow_forwardAssume that in year 1 you pay an average tax rate of 15 percent on a taxable income of $25,000. In year 2, you pay an average tax rate of 20 percent on a taxable income of $50,000. Assuming no change in tax rates, the marginal tax rate on your additional $25,000 of income is Multiple Choice O 35 percent. O 30 percent. 25 percent. O 13 percent.arrow_forwardAs income transfer programs accompanying the War on Poverty increased beginning in the latter half of the 1960s, what happened to poverty in the United States? Check all that apply. O The adjusted poverty rate has declined rapidly and is now less than half of the official poverty rate. O The poverty rate declined substantially in the period before the War on Poverty, but not in the period after the start of the War on Poverty. O In 2018, the adjusted poverty rate was only 4 percentage points lower than the official rate in 1970. O The War on Poverty has been largely ineffective in reducing the rate of poverty in the United States.arrow_forward
- Wealth, earnings, and disposable income are just three of several ways of looking at inequality. Imagine a household that earns $80,000 per year from labor. In that year, it also receives an income of $3,000 from investments, pays $12,000 in tax, and receives $7,000 in transfers from the state. Which of the following is its market income and its disposable income? O $83,000; $71,000. O $83,000 $78,000. O $80,000; $68,000. O $80,000; $75,000. Jarrow_forward4. Suppose country A has the following cumulative distribution of income: Cumulative Cumulative Percent of Percent of Families Total Income 20 5 40 15 50 27 60 30 80 50 90 70 95 82 Compute the quintile shares. What is the share of total income of the top 10 percent of families and of the top 5 percent of families?arrow_forwardWhich would be evidence of an increase in income inequality over time in the United States? O a decrease in the percentage of total personal income received by the highest quintile O an increase in the percentage of total personal income received by the highest quintile O an increase in the percentage of total personal income received by the four lowest quintiles O an increase in the percentage of total personal income received by the lowest quintilearrow_forward
- What does the positive and statistically significant correlation suggest about real income per capita as a measure of welfare? O A. Since correlation does not mean causality, real income per capita should not be used to measure welfare O B. Real income per capita is a reliablethough not perfect-indicator of human welfare within and across countries. O C. Correlation is a statistical quirk and suggests nothing about the use of real income per capita as a measure of welfare O D. Real income per capita can be trusted to give unquestionable assessments of human welfare within and across countriesarrow_forward10 9 8 7 O) 6 LO 5 4 3 2 1 2 3 4 5 6 7 8 9 10 • Label axis variables • Label curves Highlight the market envelope • Draw the wage-safety locus • Add indifference curves for a different worker. Are they more or less risk-averse?arrow_forwardAs one of the largest and fastest-growing industries in 2018, health care provided how many jobs for wage and salary workers? O 18 million 30 million 3 pts O 24 million O 12 millionarrow_forward
- A software company in Silicon Valley uses programmers (labor) and computers (capital) to produce apps for mobile devices. The firm estimates that when it comes to labor, MPL = 5 apps per month while PL = $1,000 per month. And when it comes to capital, MPC = 8 apps per month while PC = $1,000 per month. If the company wants to maximize its profits, it should: LO16.5 a. Increase labor while decreasing capital. b. Decrease labor while increasing capital. c. Keep the current amounts of capital and labor just as they are. d. None of the above.arrow_forward3. Suppose that there are two countries with dif- ferent levels of total factor productivity, and that these differences exist because of barriers to technology adoption in the low-productivity country. Also suppose that these two countries do not trade with each other. Now, suppose that residents of each country were free to live in either country. What would happen, and what conclusions do you draw from this?arrow_forwardA dozen eggs cost $1.22 in January 1990 and $2.33 in January 2016. The average wage for workers in private industries was $10.02 per hour in January 1990 and $21.33 in January 2016. By what percentage did the price of a dozen eggs rise? 48% 91% 111% By what percentage did the wage rise? O 21% 94% 113% In order to earn enough to buy a dozen eggs, a worker had to work. Workers' purchasing power in terms of eggs minutes in January 1990 and between 1990 and 2016. minutes in January 2016.arrow_forward
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