Economics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 1

Imagine a person who makes $400 per week working 40 hours per week for 50 weeks of the year. She is currently eligible for a welfare program, available to people with income below $21,000, that gives her $800 a year. No such program is available to people with income above $21,000 per year. Her boss offers her a promotion that would increase her wage by 25 cents per hour.
a. What is her total income before the promotion?
b. What is her total income if she accepts the promotion?
c. Should she accept the promotion if she wants to have higher income?