Question 1

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)]
Suppose Miller works 2,000 hours per year at a wage of $8 per hour,has child care expenses of $3,000 per year,and has work expenses of $2,000.If the state maximum welfare benefit is $10,000 per year,based on the welfare formula given,Miller's welfare benefit will be

Accepted Answer

Wages = 2000 hours x $8 per hour = $16,000 
Work expenses + child care costs = $2,000 + $3,000 = $5,000 
Substitute these values into the welfare formula: 
Welfare benefit = $10,000 - 0.7 [($16,000) - ($5,000)] 
Welfare benefit = $2,300 
Therefore, Miller's welfare benefit would be $2,300.

Question 2

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - Wages
Suppose Parker works 2,000 hours per year at a wage of $12 per hour.If the state maximum welfare benefit is $14,000 per year,based on the welfare formula given,Parker's welfare benefit will be

Accepted Answer

Using the formula: Welfare benefit = Maximum benefit - Wages
Substituting the given values, we get:
Welfare benefit = 14000 - (2000 x 12)
Welfare benefit = 14000 - 24000
Welfare benefit = -10000

Since the result is negative, it means that Parker's wages are greater than the maximum welfare benefit, hence the welfare benefit will be zero.

Question 3

Which of the following statements concerning lower marginal tax rates is correct?

Accepted Answer

The answer of Which of the following statements concerning lower...

Question 4

Which of the following statements concerning higher marginal tax rates is correct?

Accepted Answer

Higher marginal tax rates create a disincentive for individuals to work more, as they would experience a smaller net return due to the higher taxes they would have to pay. This effect also applies to eligibility for welfare benefits, as lower-income individuals may be discouraged from increasing their incomes enough to lose eligibility for such benefits. Therefore, higher marginal tax rates discourage work effort and make fewer people eligible for welfare benefits.

Question 5

If welfare benefits equal the poverty gap for each household in poverty,then the

Accepted Answer

If welfare benefits equal the poverty gap, any additional income earned by the household would reduce their benefits by the same amount, effectively creating a 100% marginal tax rate on additional income.

Question 6

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.4 [Wages - (Work expenses + Child care costs)]
Suppose Emily works 1,800 hours per year at a wage of $8 per hour,has child care expenses of $4,000 per year,and has work expenses of $1,000.If the state maximum welfare benefit is $12,000 per year,based on the welfare formula given,Emily's welfare benefit will be

Accepted Answer

Welfare benefit = $12,000 - 0.4 [($8 x 1,800) - ($1,000 + $4,000)]= $12,000 - 0.4 [$14,400 - $5,000]= $12,000 - 0.4 [$9,400]= $12,000 - $3,760= $8,240

Question 7

A marginal tax rate of zero for welfare programs will

Accepted Answer

The answer of A marginal tax rate of zero for...

Question 8

Moral hazard is

Accepted Answer

Moral hazard refers to the risk that individuals or organizations may take on more risk because they do not bear the full cost of that risk. In other words, they have an incentive to engage in risky behavior because they will not bear the full consequences of their actions. This is often seen in the insurance industry, where insured individuals may engage in riskier behavior because they know their losses will be covered. It is not related to welfare or illegal activity.

Question 9

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)]
Based on the information given,the marginal tax rate is

Accepted Answer

The marginal tax rate can be calculated by dividing the change in taxes by the change in income. In this formula, the change in taxes is equivalent to 0.7 times the change in wages, or (0.7)(Wages - Work expenses - Child care costs). As income increases, this proportion also increases, indicating a higher marginal tax rate. In fact, the maximum marginal tax rate in this formula is 70%, since for each additional dollar earned, 70 cents will be reduced from the welfare benefit. Therefore, the answer is choice C.

Question 10

Higher marginal tax rates for welfare programs will

Accepted Answer

Higher marginal tax rates for welfare programs will decrease the incentive to work because individuals may not be willing to work more hours or take a higher paying job if it means they will lose some or all of their welfare benefits. This ultimately leads to a reduction in economic productivity and an increase in welfare dependency. However, it may not necessarily increase the total welfare costs or the number of people eligible for welfare.

Question 11

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.4 [Wages - (Work expenses + Child care costs)]
Based on the information given,the marginal tax rate is

Accepted Answer

The formula for the welfare benefit includes a deduction of 0.4 times the amount of wages earned minus work expenses and child care costs. This means that for every dollar earned, 40 cents is deducted from the maximum benefit. Therefore, the marginal tax rate is 40 percent.

Question 12

A lower marginal tax rate for welfare recipients will

Accepted Answer

A lower marginal tax rate for welfare recipients reduces the disincentive to work, thereby reducing the possibility of moral hazard, where individuals might otherwise rely solely on welfare benefits without seeking employment.

Question 13

Lower marginal tax rates for welfare programs will

Accepted Answer

The answer of Lower marginal tax rates for welfare programs...

Question 14

If welfare benefits equal the poverty gap for each household in poverty,then

Accepted Answer

If welfare benefits equal the poverty gap, then for every dollar earned above the poverty line, the household would lose a dollar of welfare benefits since they are no longer in poverty. This creates a disincentive to work and can trap individuals in poverty. This is known as the welfare cliff. The effective marginal tax rate for welfare recipients can be as high as 100 percent because of this cliff, meaning they lose all their benefits as soon as they earn one more dollar. This can create a cycle of poverty and dependence on welfare. Total output for the economy is not necessarily affected by this policy.

Question 15

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - Wages
A welfare system based on the welfare formula given

Accepted Answer

The formula suggests that as wages increase, the welfare benefit decreases. This could lead to a moral hazard where individuals might not seek higher wages or additional work to maintain their welfare benefits.

Question 16

Which of the following is used to determine if a family is in poverty?

Accepted Answer

The level of current income is the primary factor used to determine if a family is in poverty, as it reflects their ability to afford basic necessities such as food, housing, and healthcare. Education level and medical needs may indirectly affect a family's financial situation, but they are not direct indicators of poverty.

Question 17

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)]
Suppose Carter works 1,200 hours per year at a wage of $6 per hour,has child care expenses of $2,200 per year,and has work expenses of $800.If the state maximum welfare benefit is $12,000 per year,based on the welfare formula given,Carter's welfare benefit will be

Accepted Answer

First, we need to calculate Carter's wages, work expenses, and child care costs for the year:
Wages = 1,200 hours x $6 per hour = $7,200
Work expenses + Child care costs = $800 + $2,200 = $3,000
Plugging these values into the welfare formula, we get:
Welfare benefit = $12,000 - 0.7 [($7,200) - ($3,000)]
Welfare benefit = $9,060
Therefore, the best choice is C, as Carter's welfare benefit is $9,060.

Question 18

Welfare support creates a moral hazard by

Accepted Answer

Welfare support can create a moral hazard by reducing the need to work. If individuals know that they can receive financial assistance without having to work, there may be less motivation for them to seek employment. This can lead to a cycle of dependency where individuals rely on welfare support instead of finding employment, which can ultimately harm both the individual and society as a whole. Encouraging workfare, which requires individuals to engage in some form of work or job training in exchange for welfare support, may help mitigate this moral hazard. Encouraging individuals to help themselves can also be important, but it is not directly related to the moral hazard created by welfare support.

Question 19

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.4 [Wages - (Work expenses + Child care costs)]
Suppose Shanika works 2,000 hours per year at a wage of $6 per hour,has child care expenses of $3,000 per year,and has work expenses of $900.If the state maximum welfare benefit is $11,000 per year,based on the welfare formula given,Shanika's welfare benefit will be

Accepted Answer

First, calculate Shanika's total earnings:

$6/hour x 2,000 hours/year = $12,000/year

Then, plug in the given numbers to the welfare formula:

Welfare benefit = $11,000 - 0.4[($12,000) - ($900 + $3,000)] 
Welfare benefit = $11,000 - 0.4[($12,000) - ($3,900)] 
Welfare benefit = $11,000 - 0.4($8,100) 
Welfare benefit = $11,000 - $3,240 
Welfare benefit = $7,760

Therefore, Shanika's welfare benefit is $7,760 per year.

Question 20

An assistance program that guarantees a minimum income,regardless of the family's earned income,has a

Accepted Answer

The marginal tax rate is the rate at which the assistance is reduced for each additional dollar of earned income. In this case, the assistance is not reduced at all, so the marginal tax rate is zero percent.

Quiz 34: Transfer Payments: Welfare and Social Security

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - Wages Suppose Parker works 2,000 hours per year at a wage of $12 per hour.If the state maximum welfare benefit is $14,000 per year,based on the welfare formula given,Parker's welfare benefit will be