Suppose the benefit formulas for various welfare programs are:
Food stamps: $400 per month-0.30 (monthly wages)
Housing assistance: $1,000 per month-0.25 (monthly wages)
Cash welfare: $400 per month-0.67 (monthly wages above $500)
a) How much will someone earning $800 a month receive in:
i) Food stamps?
ii) Housing assistance?
iii) Cash welfare?
b) What is the cumulative marginal tax rate at:
i) Wages under $500?
ii) Wages over $500?