Afternoon, Attachment. Question One the Break Even Essay

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afternoon, attachment.

Question One The break even level of a family of four under the proposal for a negative income tax that grants each person $3,000 annually -- regardless of his or her age -- is $48,000. This figure was derived partly from information that states that the transfers will be phased out at a rate of 25% as earned income increases (Hyman, 2011). Were an individual in such a family to earn $12,000, that amount multiplied by .25 would equal $3,000 dollars -- which is the break even point. Since there are four people in the family, four times that $12,000 is $48,000 -- which would be the break even point for the entire family. Plotting disposable income as a function of earned income for a situation in which all families above the break even level of income pay a 25% tax on their earnings would require putting the annual disposable income on the x axis and annual earned income on the y axis. The line would be at approximately a 45 degree angle from 0,0. The principle cost associated with this plan is that not all people in a four person family (such as infants) are able to earn money.

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Therefore, the adults would have to make a substantial amount of money before they reach the breaking point in some instances.

Question Two The needy mother in question would have to work 5.97 hours (approximately 6 hours) per day before her benefits are eliminated. This figure is derived by calculating the fact that for every dollar after 4 dollars a day that she earns, the authorities are subtracting 67 cents (Hyman, 2011). Since the mother is working at a rate of 4 dollars an hour, the authorities are subtracting $2.68 for each hour after the first one that she works each day. $2.68 multiplied by 5.97 hours would completely delete her $12 benefits a day. That 5.97 hours also takes into account the first $4 each day she is allowed to earn without losing any benefits. If one assumed that her indifference curves for work and leisure are convex, her equilibrium allocation of time between work and leisure each day would be at approximately midway on the vertical axis of the graph, and about two thirds of the way on the horizontal axis of the graph. It.....

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