public assistance plans Key Question: The following table contains three hypothetical public assista

public assistance plans

Key Question:

The following table contains three hypothetical public
assistance plans

Plan I

Earned Income Transfer Payment Total Income

$0 $4000 $4000

2000 3000 5000

4000 2000 6000

6000 1000 7000

Plan 2

Earned Income Transfer Payment Total Income

$0 $4000 $4000

4000 3000 7000

8000 2000 10000

12000 1000 13000

Plan 3

Earned Income Transfer Payment Total Income

$0 $8000 $8000

4000 6000 10000

8000 4000 12000

12000 2000 14000

a Determine the minimum income, the benefit- reduction
rate, and the break-even income for each plan

b Which plan is the most costly? The least costly? Which
plan is the most effective in reducing

poverty? The least effective? Which plan contains the strongest
disincentive to work? The weakest disincentive to work?

c Use your answers in part Ii to explain the following
statement: “The dilemma of public assistance is that you cannot bring
families up to the poverty level and simultaneously preserve work incentives
(without work requirements) and minimize program costs“