Chapter 15, Problem 2SCQ

Jonathan is a single father with one child. He can work as a server for $6 per hour for up to $\text{1},\text{5}00$ hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of $\$\text{1}0,000$ per year. He can work and still receive government benefits, but for every $\$\text{1}$ of income, his welfare stipend is $\$\text{1}$ less. Create a table similar to Table 15.4 that shows Jonathan’s options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of Jonathan’s opportunity set with and without government support.