A Welfare Program Offers Benefit B to Those Not Working

question 34

Multiple Choice

A welfare program offers benefit B to those not working. For those working, it reduces benefit by a dollar for every dollar earned until no benefits are left to be paid. It is found that increasing B results in longer hours of work for those who continue to work. The likely cause of this is

• A) the dollar for dollar reduction in B reduces the increase in income to zero, resulting in an income effect that causes people to work longer hours.
• B) only those with a higher preference for working (flatter utility curves) will continue to work
• C) the increase in B reduces the substitution effect.
• D) the increase in B results in an income and substitution effect on those working that causes them to work longer hours.

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Definitions:

Retrograde Amnesia

The inability to recall events or information learned prior to sustaining an injury or the beginning of a disease.

Brain Damage

Physical harm to the brain that impairs its functions, potentially resulting from accidents, strokes, or diseases.

Encoding

The process by which information is transformed into a format that can be stored and later retrieved from memory.

Consciously Recall

The deliberate and effortful process of retrieving information or memories from one's past.