Question 1

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, let's plug in the given values into the formula:

Welfare benefit = 11,000 - 0.4 [6,000 - (900 + 3,000)]

Simplifying the expression within the brackets:

Welfare benefit = 11,000 - 0.4 [6,000 - 3,900]

Welfare benefit = 11,000 - 0.4 * 2,100

Welfare benefit = 11,000 - 840

Welfare benefit = $7,760

Therefore, Shanika's welfare benefit will be $7,760.

Question 2

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, calculate Miller's wages: 
Wages = 2,000 hours/year x $8/hour = $16,000/year

Next, plug in Miller's information and the state maximum welfare benefit into the welfare formula: 
Welfare benefit = $10,000 - 0.7[($16,000) - ($2,000 + $3,000)] 
Welfare benefit = $2,300

Therefore, Miller's welfare benefit will be $2,300.

Question 3

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 subtracts 0.7 multiplied by the difference between wages and work expenses and child care costs from the maximum benefit, indicating that the welfare benefit is reduced by 70% of that difference. Therefore, the marginal tax rate is 70%.

Question 4

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 $8 * 1,800 = $14,400. The formula for her welfare benefit is $12,000 - 0.4 * [$14,400 - ($1,000 + $4,000)]. Simplifying inside the brackets gives $12,000 - 0.4 * [$14,400 - $5,000] = $12,000 - 0.4 * $9,400 = $12,000 - $3,760 = $8,240.

Question 5

A lower marginal tax rate for welfare recipients will

Accepted Answer

A lower marginal tax rate for welfare recipients means they keep more of what they earn, which reduces the disincentive to work, thereby reducing the possibility of moral hazard.

Question 6

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 indicates that 40 percent of the difference between wages and work expenses plus child care costs is subtracted from the maximum benefit to calculate the welfare benefit. This means that for every dollar earned through wages, 40 cents will be deducted from the welfare benefit, resulting in a marginal tax rate of 40 percent.

Question 7

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

Accepted Answer

When welfare benefits decrease by a dollar for every dollar earned through wages, it essentially means that individuals do not gain additional net income from working, as their increase in earnings is offset by a decrease in welfare benefits. This creates a situation where there is no financial incentive to earn more through work because it does not increase overall income.

Question 8

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 9

Welfare support creates a moral hazard by

Accepted Answer

Welfare support can create a moral hazard by reducing the incentive for individuals to work, as they have a safety net to rely on. This can lead to a lack of motivation to work and dependence on welfare support.

Question 10

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

Accepted Answer

The answer of An assistance program that guarantees a minimum...

Question 11

Moral hazard is

Accepted Answer

Moral hazard refers to the risk that an individual or organization will act in a risky or undesirable manner because they are protected from the negative consequences of their actions. This can occur when individuals or entities are insured or otherwise protected against loss, leading them to take on greater risk or act in a way that would not be in their best interest if they were fully exposed to the potential negative consequences.

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 - 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, Parker's welfare benefit would be:
$14,000 - ($12/hour x 2,000 hours) = $14,000 - $24,000 = -$10,000

Since the result is negative, Parker would not receive any welfare benefits.

Question 14

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 15

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 total annual income from working:

1200 hours/year x $6/hour = $7,200

Next, we plug this income, along with his child care and work expenses, into the welfare formula:

Welfare benefit = $12,000 - 0.7[($7,200) - ($2,200 + $800)] 
Welfare benefit = $12,000 - 0.7($4,000) 
Welfare benefit = $12,000 - $2800 
Welfare benefit = $9,200

However, since this amount is higher than the state maximum welfare benefit of $12,000, Carter's welfare benefit will be capped at that amount.

Therefore, the correct answer is (C) $9,060, which is the result of subtracting 30% of Carter's remaining earnings ($4,000 - $3,000 = $1,000) from the state maximum benefit of $12,000.

Question 16

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, let's calculate Ramirez's total earning from his job: 
$7/hour x 1,800 hours = $12,600

Next, we can plug in the given values into the welfare formula: 
Welfare benefit = $13,000 - 0.7 [($7/hour x 1,800 hours) - ($600 + 0)] 
Welfare benefit = $13,000 - 0.7 [($12,600) - ($600)] 
Welfare benefit = $13,000 - 0.7 [($12,000)] 
Welfare benefit = $13,000 - $8,400 
Welfare benefit = $4,600

Therefore, Ramirez's welfare benefit is $4,600.

Question 17

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

Accepted Answer

Higher marginal tax rates discourage work effort because individuals will take home less pay for every extra hour or dollar earned. This can result in individuals choosing to work less or forego work altogether, reducing their eligibility for welfare benefits since those benefits are typically tied to work or income levels.

Question 18

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 creates a disincentive for recipients to earn more through work, as any increase in wages directly reduces their welfare benefits, potentially leading to moral hazard where individuals might prefer welfare over working.

Question 19

A marginal tax rate of zero for welfare programs will

Accepted Answer

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

Question 20

Higher marginal tax rates for welfare programs will

Accepted Answer

Higher marginal tax rates for welfare programs decrease the incentive to work as people may be discouraged to work and earn more if it means losing their benefits. This could lead to a reduction in the labor force and a decrease in economic growth.

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