Chapter 14R, Problem 25MCQ

To determine

The correct option for low-income workers which would be an effective way to prevent means-tested antipoverty programs from creating a disincentive to work

Answer to Problem 25MCQ

From the available options, the correct option is a low marginal tax rate.

Explanation of Solution

As Means-tested programs are the programs that limit the eligibility to individuals as well as family members whose income, earnings, or assets are below the pre-determined level of income or pre-determined threshold which means with the implementation of the low marginal tax rate, workers with low income can be effectively prevented from doing a disadvantaged or disincentive work. A high and average tax rate cannot improve the level of income of the person and the elimination of benefits for employees will ruin their earnings. And, the notch-based program can improve productivity or increase the stress of workers with low-level income but cannot increase their level of income.

Therefore, the correct option is e (a low marginal tax rate), and all options: a, b, c, and d are incorrect.

Economics Concept Introduction

Introduction: Antipoverty programs are the programs or schemes which work for the elimination or reduction of the poverty rate in the country. These programs include proper access to food, shelter, basic support, health, etc., for each individual who is living under the poverty line.