If parents enjoy investing in their children, richer parents invest more in their children because they can afford it (i.e., investment is a normal good). True or False?

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Darryn D'SouzaLv10

28 Sep 2019

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In 1981 Andrew Carnegie asserted that "parents who leave their children enormous wealth generally deaden their children's talents and energies and tempt them to lead less productive lives."

A.) Evaluate this statement using the labor-leisure model and explain the effects of such inheritances on hours of work and leisure.

B.) Some parents may link the inheritances to the actual amount earned by their children in the labor market. That is, the children can claim the inheritance only if their labor earnings exceed $50,000 per year. However, if their labor compensation is more than $150,000 per year the inheritance will be given to charity. Draw the budget constraint under the earnings-conditioned inheritance (scenario II).

C.) Now assume that the parents are interested in the amount of time their children spend in the labor market. Under this scenario, the children will receive double the market wage rate if they work at least 25 hours per week, three times the market wage if they work between 30 hours and up to 45 hours per week, and only the market wage for any additional hour worked. Draw the budget constraint under the hours-of-work condictioned inheritance (scenario III).

D.) Compare the welfare of the children when there is no inheritance whatsoever (scenario I) and under the two alternative scenarios (scenario II, scenario III). Are the children better off? Are any worse off? Explain.

[Note: For all the previous parts (a)-(d) assume that there is both a labor and a non-labor income component.]

apricotspider478

Which of the following is true in most states?

	a.	Able-bodied citizens (as determined by the state) can qualify for Medicaid even if they are not supporting any children.
	b.	Able-bodied citizens (as determined by the state) can qualify for Medicaid even if they are not supporting any children as long as their income is low.
	c.	Able-bodied citizens (as determined by the state) cannot qualify for Medicaid if they have no children (or are not supporting any children) even if their income is low.
	d.	Medicaid reimbursement levels are set at very very high rates

1. Speeding

a) Give one argument for making the fine for speeding proportional to income.

b) Give one argument against making the fine for speeding proportional to income.

2. Equality before the Law

In principle, for US citizens in US courts there is equality before the Law. In practice, however, richer individuals can afford to allocate more resources to preparing and presenting their cases, including hiring more talented lawyers, with the result that they are more likely to win their cases.

What do you think David Friedman's (the book's author) opinion would be about the "fairness" of this reality?

fuchsiacat962

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If parents enjoy investing in their children, richer parents invest more in their children because they can afford it (i.e., investment is a normal good). True or False?

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