Leo Is a Welfare Recipient Who Qualifies for Two Means-Tested

question 10

Multiple Choice

Leo is a welfare recipient who qualifies for two means-tested cash benefits.If he does not earn any income,he receives $225 from each benefit.For each dollar he earns (which his employer is required to report to the welfare agency) ,each benefit is reduced by 75 cents until the benefit equals zero.
When Leo's earnings are less than $300,each extra dollar he earns causes his total income (earnings plus benefits) to

• A)fall by 25 cents.
• B)rise by 50 cents.
• C)fall by 50 cents.
• D)rise by 75 cents.

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Definitions:

Marginal Cost

The cost incurred by producing one additional unit of a good or service, crucial for decision-making in production and pricing strategies.

Total Cost

The complete cost of producing a specific quantity of output, combining both fixed and variable costs.

Marginal Cost

The additional cost incurred by producing one more unit of a product or service, crucial for economic decision-making and pricing strategies.

Diminishing Marginal Product

The principle that as more of a variable input is added to a fixed input, the additional output gained from each new unit of input will eventually decrease.