Suppose that a negative income tax was created that set a minimum income for a family of $5,000 per year and had a marginal tax rate of 33 percent. What is the break-even level of income? If a person earned $5,000 . what would the after-tax income level be? If the earnings were $10,000 . what would the after-tax income be?
The break-even level of income is $15,000 . At that income the tax is $5,000 (exactly equal to the guarantee), and the payment by government to the family ceases. If the family earned $5,000 . one-third of $5,000 would be deducted from the guarantee, and the family would have an income of $8,333.33 . If the family earned $10,000 . one-third of $10,000 would be deducted from the guarantee, and the family would have an income of $11,666.67.
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In the figure above, the price of bonds would fall from P1 to P2 when
A) inflation is expected to increase in the future. B) interest rates are expected to fall in the future. C) the expected return on bonds relative to other assets is expected to increase in the future. D) the riskiness of bonds falls relative to other assets.
A long put position
A) has a value of zero if the stock price is below the exercise price. B) has a value equal to the stock price minus the exercise price if the stock price is above the exercise price. C) has a value of zero if the stock price at the time of purchase exceeds the expected stock price at option expiration. D) has a value equal to the exercise price minus the stock price if the stock price is below the exercise price.
As the wage rate decreases, the amount of time spent on market work usually
a. increases because the opportunity cost of nonmarket work increases b. increases because of the substitution effect c. decreases because of the income effect d. decreases because the value of leisure time increases e. decreases because the opportunity cost of leisure declines
Minimum wage legislation
a. sets a price ceiling above the market-clearing price b. has no impact if the minimum wage is above the market-clearing price c. affects every worker in every trade in precisely the same way d. creates some degree of unemployment when the minimum wage is above the equilibrium wage e. is opposed by organized labor