Suppose that Trevor and Rachel McAdams are married and have three children. Rach

Question

Suppose that Trevor and Rachel McAdams are married and have three children. Rachel is the primary earner in the household. Trevor is considering joining the labor force, at which point he would earn $60 per hour for 40 hours per week. The cost of child care would be $10 per hour per child for 40 hours per week. Trevor is indifferent between working and staying at home except for the financial impact. Assume that his tax rate is 40%. Question 5 of 7 2.0 Points 0 Accepted characters Now assume that child care IS fully tax deductible and that child care at home is NOT imputed and taxed. Calculate the weekly difference between Trevor's take-home pay (after paying taxes and child care) if he works versus if he stays home to care for the children. (Do not enter commas, or dollar signs) $

Explanation / Answer

Income of Trevor =$60*40=$2400

Expense on child care = $10*40 =$400

So the taxable income = $2400-$400 =$2000

So take home income = $2000-$2000*0.4 =$1200

If Trevor were at home, he would have saved the expense of child care which is $400

So the difference = $1200-$400 = $800

So the answer is $800

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