Number of Work Hours Earnings from Work Government Benefits Total Income

1,500

1,200

900

600

300

0

$9,000

$7,200

$5,400

$3,600

$1,800

$0

$1,000

$2,800

$4,600

$6,400

$8,200

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000

$10,000
558

3. The following table shows a policy where only 30 cents in government support is pulled right back for

every $1 of income earned. Jonathon’s labor-leisure diagram is shown in the figure following the table.

“Opportunity set after program” extends from (0, $16,300) to (1,500, $10,000). “Opportunity set before

program” slopes downward from (0, $9,000) to (1,500, $0).

Number of Work Hours Earnings from Work Government Benefits Total Income

1,500

1,200

900

600

300

0

$9,000

$7,200

$5,400

$3,600

$1,800

$0

$7,300

$7,840

$8,380

$8,920

$9,460

$10,000

$16,300

$15,040

$13,780

$12,520

$22,260

$10,000

4. The earned income tax credit works like this: a family receives a tax break that increases according to how
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