Final answer:
Josh's standard deduction on his tax return will be $1,100. For Jonathon, a table and a labor-leisure diagram would illustrate his income based on hours worked and government benefits, taking into account a $1 reduction in welfare for every $1 earned from work.
Step-by-step explanation:
Understanding Tax Deductions and Welfare Benefits
Josh, who is 17 years old, received $2,500 in interest and earned $625 from a part-time job. When he files his own tax return as a dependent, his standard deduction will be the greater of $1,100 or his earned income ($625) plus $350, but not more than the basic standard deduction for an individual. Since $625 + $350 = $975, which is less than $1,100, his standard deduction will be $1,100.
For Jonathon's scenario:
- Hours to work: Various (0 to 1,500)
- Earnings from work: Hourly wage ($6) multiplied by hours worked
- Government benefits: $10,000 minus earnings from work
- Total income: Earnings from work plus government benefits
To visualize Jonathan's opportunity set, we would create a labor-leisure diagram showing the trade-offs between working hours and the combination of earnings and government support. The welfare stipend decreases by $1 for every $1 earned, affecting his decision on how many hours to work. In this diagram, Jonathan's opportunity set would shift based on the hours he chooses to work and the corresponding welfare benefits received.