Question

Crystal is a single mother with 2 children. She can earn $10 per hour and can work up to 1,800 hours per year. However, if she does not earn any income at all, she will receive government benefits totaling $18,000 per year. For every $1 of income she earns, her level of government support is reduced by $1. Crystal’s labor-leisure opportunity set

A. has doubled
B. is smaller with the government support program
C. is not affected by the government support program
D. is larger with the government support program

Answer 1

The correct answer is D

Step-by-step explanation:

Crystal who is a single mother, have two options for earning, one is that she can earn $10 per hour and could work for 1,800 hours per year that is $18,000 per year and the other option is that if she does not earn, she will receive government benefits of $18,000 per year.

Therefore, the crystal labor leisure opportunity set is larger with the program of the government support as every $1 of income she earns the level of government support will be reduced by $1.