1. Consider the welfare program (Such as food stamps) with benefits that decrease as an individual's income increase. Draw the individual's budget constraint with and without the subsidy. (*Put hours of work on the horizontal axis, and income on the vertical axis). Use the diagram to illustrate how work incentives are reduced and how a fixed dollar subsidy could lead the individual to the same level of utility at lower dollar cost.
2. Assume you were particularly concerned with the welfare of children. How would the affect the kind of welfare programs you might support or how you might design your welfare programs?