Question 1

If the Social Security program was privatized,

Accepted Answer

A) Work disincentives for younger workers would definitely increase. 
B) Income inequalities would definitely decrease. 
C) Individuals would essentially make contributions to their own pension fund. 
D) The system would be financed on a pay-as-you-go basis. 
A) Work disincentives for younger workers would definitely increase. 
B) Income inequalities would definitely decrease. 
C) Individuals would essentially make contributions to their own pension fund. 
D) The system would be financed on a pay-as-you-go basis.

Question 2

The existence of transfer programs implies that

Accepted Answer

A) Government failure has occurred. 
B) Market failure has occurred. 
C) Technical efficiency exists. 
D) Allocative efficiency exists. 
A) Government failure has occurred. 
B) Market failure has occurred. 
C) Technical efficiency exists. 
D) Allocative efficiency exists.

Question 3

The existence of income transfer programs can

Accepted Answer

A) Increase the work incentive and increase GDP. 
B) Increase the work incentive and increase total income. 
C) Decrease the incentive to work,but still increase GDP. 
D) Decrease the incentive to work and reduce income and output. 
A) Increase the work incentive and increase GDP. 
B) Increase the work incentive and increase total income. 
C) Decrease the incentive to work,but still increase GDP. 
D) Decrease the incentive to work and reduce income and output.

Question 4

The primary economic cost of the Social Security program is the financial cost of administering the program.

Accepted Answer

A) True 
 B)False

Question 5

In-kind transfers tend to be

Accepted Answer

A) Are received as cash. 
B) Are more target-efficient than cash. 
C) Encourage the poor to earn more income. 
D) Decrease the real income of poor families. 
A) Are received as cash. 
B) Are more target-efficient than cash. 
C) Encourage the poor to earn more income. 
D) Decrease the real income of poor families.

Question 6

Moral hazard is

Accepted Answer

A) The risk involved in accepting welfare. 
B) An incentive to engage in undesirable behavior. 
C) The involvement in illegal activity. 
D) The abuse of the welfare system by some nonneedy recipients. 
A) The risk involved in accepting welfare. 
B) An incentive to engage in undesirable behavior. 
C) The involvement in illegal activity. 
D) The abuse of the welfare system by some nonneedy recipients.

Question 7

Which of the following programs is likely to have low target efficiency?

Accepted Answer

A) An insurance card that allows the elderly to obtain health care. 
B) A cash payment directly to the landlord to offset the cost of housing for certain individuals. 
C) Food stamps that can only be used for food. 
D) A cash payment that the recipient is encouraged to use for housing. 
A) An insurance card that allows the elderly to obtain health care. 
B) A cash payment directly to the landlord to offset the cost of housing for certain individuals. 
C) Food stamps that can only be used for food. 
D) A cash payment that the recipient is encouraged to use for housing.

Question 8

The poverty gap is the

Accepted Answer

A) Shortfall between actual income and the poverty threshold. 
B) Percentage of families under the poverty level. 
C) Difference between the income of a household in poverty and the average income. 
D) Difference between the incomes of the richest and poorest households. 
A) Shortfall between actual income and the poverty threshold. 
B) Percentage of families under the poverty level. 
C) Difference between the income of a household in poverty and the average income. 
D) Difference between the incomes of the richest and poorest households.

Question 9

The breakeven level of income equals the

Accepted Answer

A) Minimum amount of income society considers desirable for households to have. 
B) Amount of income a family may earn without losing any welfare benefits. 
C) Need standard with a marginal tax rate of zero percent. 
D) The highest level of income at which a household ceases to receive welfare benefits. 
A) Minimum amount of income society considers desirable for households to have. 
B) Amount of income a family may earn without losing any welfare benefits. 
C) Need standard with a marginal tax rate of zero percent. 
D) The highest level of income at which a household ceases to receive welfare benefits.

Question 10

Use the following formula to answer the indicated question: Benefit amount = Maximum award - 0.6 (Wages in excess of ceiling)Charles is retired and earns $10,000 per year working part-time.He is entitled to a maximum Social Security retirement benefit of $14,000.Social Security regulations allow him to earn $8,000 and still get maximum benefits.If he increases the number of hours he works and thus increases his earnings to $20,000,his total income will increase by

Accepted Answer

A) $4,000. 
B) $6,000. 
C) $10,000. 
D) $28,000. 
A) $4,000. 
B) $6,000. 
C) $10,000. 
D) $28,000.

Question 11

Figure 34.2 illustrates two labor supply curves.If in-kind payments become less available in this economy and marginal tax rates decrease significantly,we would expect a shift from

Accepted Answer

A) S1 to S2 only. 
B) S1 to S2 and a movement up S2. 
C) S2 to S1 only. 
D) S2 to S1 and a movement up S1. 
A) S1 to S2 only. 
B) S1 to S2 and a movement up S2. 
C) S2 to S1 only. 
D) S2 to S1 and a movement up S1.

Question 12

The basic goal of income transfer programs is to reduce income inequalities.

Accepted Answer

A) True 
 B)False

Question 13

Refer to Figure 34.4.The breakeven level of income in this example is

Accepted Answer

A) $5,000. 
B) $7,500. 
C) $12,500. 
D) $17,500. 
A) $5,000. 
B) $7,500. 
C) $12,500. 
D) $17,500.

Question 14

The official poverty index is based on

Accepted Answer

A) Family size and income. 
B) In-kind income. 
C) An event condition. 
D) The number in the family who are employed. 
A) Family size and income. 
B) In-kind income. 
C) An event condition. 
D) The number in the family who are employed.

Question 15

Refer to Figure 34.3.The implied marginal tax rate is

Accepted Answer

A) 0 percent. 
B) 50 percent. 
C) 100 percent. 
D) Greater than 100 percent. 
A) 0 percent. 
B) 50 percent. 
C) 100 percent. 
D) Greater than 100 percent.

Question 16

Use the following formula to answer the indicated question: Benefit amount = Maximum award - 0.4 (Wages in excess of ceiling)Lucy is retired and earns $12,000 per year working part-time.She is entitled to a maximum Social Security retirement benefit of $14,000.Social Security regulations allow her to earn $9,000 and still get maximum benefits.Lucy's total income,including Social Security benefits,is

Accepted Answer

A) $9,000. 
B) $23,000. 
C) $24,800. 
D) $26,000. 
A) $9,000. 
B) $23,000. 
C) $24,800. 
D) $26,000.

Question 17

Figure 34.2 illustrates two labor supply curves.If in-kind payments become readily available in this economy and marginal tax rates increase significantly,we would expect a shift from

Accepted Answer

A) S1 to S2 only. 
B) S2 to S1 and a movement up S1. 
C) S2 to S1 only. 
D) S2 to S1 and a movement down S1. 
A) S1 to S2 only. 
B) S2 to S1 and a movement up S1. 
C) S2 to S1 only. 
D) S2 to S1 and a movement down S1.

Question 18

The earnings test reduces the amount of Social Security payments a retiree can collect unless she or he is under 60.

Accepted Answer

A) True 
 B)False

Question 19

Low marginal tax rates discourage work effort but make fewer people eligible for welfare.

Accepted Answer

A) True 
 B)False

Question 20

Social insurance programs

Accepted Answer

A) Are event-conditional. 
B) Involve an income eligibility test. 
C) Are a type of welfare program. 
D) Are means-tested. 
A) Are event-conditional. 
B) Involve an income eligibility test. 
C) Are a type of welfare program. 
D) Are means-tested.

Exam 34: Transfer Payments: Welfare and Social Security

If the Social Security program was privatized,

The existence of transfer programs implies that

The existence of income transfer programs can

The primary economic cost of the Social Security program is the financial cost of administering the program.

In-kind transfers tend to be

Moral hazard is

Which of the following programs is likely to have low target efficiency?

The poverty gap is the

The breakeven level of income equals the

Figure 34.2 illustrates two labor supply curves.If in-kind payments become less available in this economy and marginal tax rates decrease significantly,we would expect a shift from

The basic goal of income transfer programs is to reduce income inequalities.

Refer to Figure 34.4.The breakeven level of income in this example is

The official poverty index is based on

Refer to Figure 34.3.The implied marginal tax rate is

Figure 34.2 illustrates two labor supply curves.If in-kind payments become readily available in this economy and marginal tax rates increase significantly,we would expect a shift from

The earnings test reduces the amount of Social Security payments a retiree can collect unless she or he is under 60.

Low marginal tax rates discourage work effort but make fewer people eligible for welfare.

Social insurance programs

Economics: the Core Issues

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Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

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Natural Monopolies: Deregulation

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