A Single Mother Is Currently Paying Childcare Cost of $10

question 26

Multiple Choice

A single mother is currently paying childcare cost of $10 an hour and she works 8 hours a day.The government then provides "free" child care,raising the property tax on the mother's home by $80 a day.The effect of this event will be to

• A) cause the mother to work less hours.
• B) cause the mother to work the same hours.
• C) cause the mother to work more hours.
• D) cannot tell without knowing which effect dominates: the income or substitution effect.

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Definitions:

Present Value

The present value of an anticipated amount of money or sequence of financial inflows, discounted by a particular return rate.

Payments

Amounts of money that are paid or due to be paid by one party to another for goods provided, services rendered, or debt obligations.

Compounded Quarterly

The process of calculating interest on a principal amount at a specified interest rate, with the interest being added to the principal at the end of every three months.

End-Of-Quarter Payments

Payments that are made at the end of each quarter, typically in a financial or leasing agreement.