Question 1

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:

Wages = 1,200 hours/year x $6/hour = $7,200/year
Work expenses + Child care costs = $800 + $2,200 = $3,000/year

Substituting these values into the welfare formula, we get:

Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)]
Welfare benefit = $12,000 - 0.7 [$7,200 - $3,000]
Welfare benefit = $12,000 - 0.7 [$4,200]
Welfare benefit = $12,000 - $2,940
Welfare benefit = $9,060

Therefore, Carter's welfare benefit would be $9,060.

Question 2

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 formula shows that for every $1 increase in wages, the welfare benefit is reduced by $0.7. This means that the individual is effectively being taxed at a rate of 70% on their wages. Choice C is the only option that reflects this high marginal tax rate.

Question 3

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 indicates that as wages increase, welfare benefits decrease. This could discourage individuals from seeking higher-paying jobs or working more hours, as their welfare benefits would be reduced as their wages increase, leading to a moral hazard where individuals might prefer to remain on welfare rather than work.

Question 4

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, we need to calculate Shanika's wages earned in a year:
Wages = 2,000 hours × $6 per hour = $12,000 per year

Next, we can substitute the given values into the formula to find Shanika's welfare benefit:
Welfare benefit = $11,000 - 0.4 [($12,000) - ($3,000 + $900)]
Welfare benefit = $11,000 - 0.4 ($8,100)
Welfare benefit = $7,760

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

Question 5

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - Wages Based on the information given, the marginal tax rate is

Accepted Answer

The answer of Use the following formula to answer the...

Question 6

A lower marginal tax rate for welfare recipients will

Accepted Answer

A lower marginal tax rate for welfare recipients will reduce the possibility of moral hazard by decreasing the incentive for recipients to remain on welfare when they have the ability to work. This can be done by reducing the penalty for earning income, which is what a lower marginal tax rate would do. Option A is incorrect because a lower marginal tax rate would increase work incentives, not decrease them. Option C is incorrect because increasing the poverty gap would encourage more individuals to remain on welfare. Option D is incorrect because a lower marginal tax rate would likely increase welfare spending rather than reduce it due to increased participation.

Question 7

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

Accepted Answer

When welfare benefits are designed to exactly equal the poverty gap for each household, any additional income earned by the household would directly reduce their welfare benefits by the same amount, effectively creating a 100% marginal tax rate on additional earnings. This is because the additional income reduces the poverty gap, which then reduces the welfare benefits dollar for dollar.

Question 8

The official poverty index is based on

Accepted Answer

The official poverty index is based on family size and income. It measures poverty by comparing a family's income to a set of income thresholds that vary by family size and composition.

Question 9

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 shows that for every dollar earned in wages, the welfare benefit will be reduced by 40 cents. This means that the person will effectively be paying a marginal tax rate of 40 percent on their wages.

Question 10

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

Parker's wages will be $24,000 per year (2,000 hours worked x $12 per hour). Since this amount is greater than the maximum welfare benefit of $14,000, Parker is not eligible for welfare benefits. Therefore, the welfare benefit is zero.

Question 11

Moral hazard is

Accepted Answer

Moral hazard refers to the phenomenon where individuals or entities are encouraged to engage in risky or undesirable behavior because they are shielded from the potential negative consequences of their actions. This is often the case when there is insurance or other forms of protection in place, as individuals may be more likely to take risks knowing that they will not bear the full cost of any negative outcomes. It is not specifically related to welfare or any illegal activity mentioned in options A, C, and D.

Question 12

Lower marginal tax rates for welfare programs will

Accepted Answer

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

Question 13

Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)] Suppose Ramirez works 1,800 hours per year at a wage of $7 per hour, has no child care expenses, and has work expenses of $600.If the state maximum welfare benefit is $13,000 per year, based on the welfare formula given, Ramirez's welfare benefit will be

Accepted Answer

First, we need to calculate Ramirez's total income from work:

Total income = 1,800 hours/year x $7/hour - $600 in work expenses 
Total income = $11,400

Next, we can use the welfare formula to calculate Ramirez's welfare benefit:

Welfare benefit = $13,000 - 0.7[($11,400) - ($0 + $0)] 
Welfare benefit = $13,000 - 0.7($11,400) 
Welfare benefit = $13,000 - $7,980 
Welfare benefit = $5,020

Therefore, Ramirez's welfare benefit would be $4,600, which is less than the maximum benefit.

Question 14

Higher marginal tax rates for welfare programs will

Accepted Answer

Higher marginal tax rates for welfare programs decrease the incentive for individuals to work and earn income, as they would be taxed at higher rates, making it less attractive to work. This might lead to more people opting for welfare programs and increasing the overall costs. It might reduce the moral hazard associated with welfare, as fewer people would want to be on welfare, but this will have little impact as the primary reason for being on welfare is due to income insufficiency or unemployment.

Question 15

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

Accepted Answer

Every dollar of wages resulting in a lost dollar of welfare benefits means that for each dollar earned by a household, their welfare benefits decrease by the same amount, effectively filling the poverty gap without providing additional net income, which does not directly incentivize work or increase the effective marginal tax rate, nor does it guarantee an increase in total economic output.

Question 16

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

Emily's annual wages are $14,400 (1,800 hours * $8 per hour). Subtracting work expenses ($1,000) and child care costs ($4,000) from her wages gives $9,400. Applying the formula: $12,000 - 0.4 * ($9,400) = $12,000 - $3,760 = $8,240.

Question 17

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

Accepted Answer

The level of current income is typically used as the primary indicator of whether or not a family is in poverty. It is often measured against the federal poverty line, which takes into account family size and composition as well as regional cost of living. Education can play a role in poverty level, but it is not the sole determinant.

Question 18

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

First, let's plug in all the given values into the formula:
Welfare benefit = Maximum benefit - 0.7 [Wages - (Work expenses + Child care costs)]
= 10,000 - 0.7 [8,000 - (2,000 + 3,000)]
= 10,000 - 0.7 [3,000]
= 10,000 - 2,100
= $7,900
Therefore, Miller's welfare benefit will be $2,100, which is option B.

Question 19

Welfare support creates a moral hazard by

Accepted Answer

Welfare support creates a moral hazard by reducing the need to work. When individuals are provided with financial support without any requirement to work for it, it may decrease their desire to work and earn a living. This can create a dependency on welfare support and disincentivize individuals from seeking employment or engaging in other productive activities. This can ultimately lead to a decrease in societal productivity and economic growth.

Question 20

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

Accepted Answer

If welfare benefits equaled the poverty gap for each household in poverty, it would mean that each family would have enough income to rise above the poverty line, effectively eliminating poverty. This would have significant positive effects on society, including reducing healthcare costs, increasing children's educational opportunities, reducing crime rates, and reducing income inequality.

Quiz 20: Transfer Payments: Welfare and Social Security

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