Question

Claude is a single father with 2 children. He can work as a stock clerk at Supermaxi store for $8 per hour up to 1,500 hours per year. He is eligible for welfare, and if he does not earn any income, he will receive $15,000 a year. If Tim works, the government policy is to deduct 70 cents from his welfare stipend for every $1 that he earns in income. This government policy provides a monetary incentive to work, because Group of answer choices

Answer 1

Answer: D. Tim’s income level increases the more he works.

Explanation:

Tim's income for the year = Salary from working + Welfare

Lets say Tim works 200 hours in a year.

His salary will be:

= 8 * 200 hours

= $1,600

Welfare:

70 cents off for every $1 so the amount they will deduct from Welfare is:

= 0.7 * 1,600

= $1,120

They will deduct this amount from the welfare of $15,000 and give Tim the rest.

Total income = 1,600 + (15,000 - 1,120)

= $15,480

Lets say Tim works 500 hours a year.

Salary is:

= 500 * 8

= $4,000

Amount to be deducted for welfare:

= 0.7 * 4,000

= $2,800

Total income:

= 4,000 + (15,000 - 4,000)

= $16,200

Notice how the income goes up as Tim works more. This policy therefore provides a monetary incentive to work harder.