Question 1

Many economists believe that a family bases its spending decisions on its permanent, or average, income rather than on transitory income.

Accepted Answer

A) True 
 B)False

Question 2

Scenario 20-7
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/6 of income) - $24,000
-Refer to Scenario 20-7. Below what level of income would families start to receive a subsidy from this negative income tax?

Accepted Answer

A) $24,000 
B) $50,000 
C) $144,000 
D) $150,000 
A) $24,000 
B) $50,000 
C) $144,000 
D) $150,000

Question 3

A typical worker's normal or average income is called

Accepted Answer

A) the life cycle. 
B) permanent income. 
C) transitory income. 
D) in-kind transfers. 
A) the life cycle. 
B) permanent income. 
C) transitory income. 
D) in-kind transfers.

Question 4

One existing government program that works much like a negative income tax is the Earned Income Tax Credit.

Accepted Answer

A) True 
 B)False

Question 5

Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.   Source: US Census Bureau
-Refer to Table 20-14. In 2010, what percentage of total income in the US did the bottom 20% of families have?

Accepted Answer

The answer of Table 20-14
Income Inequality in the United States
The...

Question 6

Economists Cox and Alm compared the gap between rich and poor and found that the richest 20% was about 2 times better off than the poorest 20% when they compared what data?

Accepted Answer

consumptio

Question 7

The 2011 U.S. distribution of income shows that the top 20 percent of families have approximately what share of income?

Accepted Answer

A) 20 percent 
B) 35 percent 
C) 50 percent 
D) 80 percent 
A) 20 percent 
B) 35 percent 
C) 50 percent 
D) 80 percent

Question 8

Economists who study economic mobility have found that, if a father earns 20 percent above his generation's average income, his son will most likely earn

Accepted Answer

A) an income equal to his generation's average income. 
B) 8 percent above his generation's average income. 
C) 5 percent below his generation's average income. 
D) 3 percent above his generation's average income. 
A) an income equal to his generation's average income. 
B) 8 percent above his generation's average income. 
C) 5 percent below his generation's average income. 
D) 3 percent above his generation's average income.

Question 9

A family's ability to buy goods and services depends largely on the family's

Accepted Answer

A) economic mobility. 
B) place in the economic life cycle. 
C) transitory income. 
D) permanent income. 
A) economic mobility. 
B) place in the economic life cycle. 
C) transitory income. 
D) permanent income.

Question 10

Which of the following is not a question that economists try to answer when measuring the distribution of income?

Accepted Answer

A) How many people live in poverty? 
B) How often do people receive a raise at work? 
C) How often do people move among income classes? 
D) What problems arise in measuring the amount of inequality? 
A) How many people live in poverty? 
B) How often do people receive a raise at work? 
C) How often do people move among income classes? 
D) What problems arise in measuring the amount of inequality?

Question 11

Government vouchers to purchase food, also known as food stamps, are an example of

Accepted Answer

A) an in-kind transfer. 
B) life-cycle income. 
C) a negative income tax. 
D) permanent income. 
A) an in-kind transfer. 
B) life-cycle income. 
C) a negative income tax. 
D) permanent income.

Question 12

The poverty line is based on the percentage of people who cannot afford an adequate diet.

Accepted Answer

A) True 
 B)False

Question 13

Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) are examples of .

Accepted Answer

The answer of Temporary Assistance for Needy Families (TANF) and...

Question 14

Relative to direct cash payments, in-kind transfers have the advantage of being

Accepted Answer

A) more politically popular. 
B) more efficient. 
C) more respectful of the poor. 
D) of a higher dollar value than cash payments. 
A) more politically popular. 
B) more efficient. 
C) more respectful of the poor. 
D) of a higher dollar value than cash payments.

Question 15

Medicaid and food stamps are

Accepted Answer

A) available only to the elderly. 
B) forms of in-kind assistance. 
C) forms of cash assistance. 
D) transfer payments. 
A) available only to the elderly. 
B) forms of in-kind assistance. 
C) forms of cash assistance. 
D) transfer payments.

Question 16

Which of the following statements illustrates diminishing marginal utility?

Accepted Answer

A) An extra dollar of income to a poor person provides that person with more additional utility than does an extra dollar to a rich person. 
B) An extra dollar of income to a poor person provides that person with less additional utility than does an extra dollar to a rich person. 
C) An extra dollar of income to a poor person provides that person with the same additional utility as does an extra dollar to a rich person. 
D) An extra dollar of income to a poor person provides that person with the same total utility as does an extra dollar to a rich person. 
A) An extra dollar of income to a poor person provides that person with more additional utility than does an extra dollar to a rich person. 
B) An extra dollar of income to a poor person provides that person with less additional utility than does an extra dollar to a rich person. 
C) An extra dollar of income to a poor person provides that person with the same additional utility as does an extra dollar to a rich person. 
D) An extra dollar of income to a poor person provides that person with the same total utility as does an extra dollar to a rich person.

Question 17

Robert Nozick criticizes Rawls's concept of justice by using an example of

Accepted Answer

A) minimum wage laws. 
B) the grade distribution in a class. 
C) a leaky bucket. 
D) the price of tea in China. 
A) minimum wage laws. 
B) the grade distribution in a class. 
C) a leaky bucket. 
D) the price of tea in China.

Question 18

Which of the following statements is correct?

Accepted Answer

A) A minimum wage law will result in less additional unemployment if labor demand is elastic rather than inelastic. 
B) An in-kind transfer allows a person to use the benefit to purchase whatever they think they need most. 
C) If a tax policy states that taxes owed equal 1/3 of income less $15,000, a person earning $25,000 per year would owe $6,666.67 in taxes. 
D) Welfare reform enacted in 1996 limited the amount of time recipients could stay on welfare. 
A) A minimum wage law will result in less additional unemployment if labor demand is elastic rather than inelastic. 
B) An in-kind transfer allows a person to use the benefit to purchase whatever they think they need most. 
C) If a tax policy states that taxes owed equal 1/3 of income less $15,000, a person earning $25,000 per year would owe $6,666.67 in taxes. 
D) Welfare reform enacted in 1996 limited the amount of time recipients could stay on welfare.

Question 19

Table 20-4   Source: U.S. Bureau of Census
-Refer to Table 20-4. Comparing data from 2000 and 2011, which of the following statements is correct?

Accepted Answer

A) There has been no change in overall income inequality because the share of income held by the fourth fifth is nearly identical. 
B) Overall income inequality has worsened slightly, as shown by the simultaneous increase in the share of income held by the top fifth and the decrease in the share of income held by the bottom fifth. 
C) Overall income inequality has improved because the share held by the second fifth has declined by 0.5%. 
D) None of the above is correct. 
A) There has been no change in overall income inequality because the share of income held by the fourth fifth is nearly identical. 
B) Overall income inequality has worsened slightly, as shown by the simultaneous increase in the share of income held by the top fifth and the decrease in the share of income held by the bottom fifth. 
C) Overall income inequality has improved because the share held by the second fifth has declined by 0.5%. 
D) None of the above is correct.

Question 20

Raising total utility is the prime objective of which political philosophy?

Accepted Answer

A) utilitarianism 
B) liberalism 
C) libertarianism 
D) None of the above is correct. 
A) utilitarianism 
B) liberalism 
C) libertarianism 
D) None of the above is correct.

Exam 20: Income Inequality and Poverty

Many economists believe that a family bases its spending decisions on its permanent, or average, income rather than on transitory income.

A typical worker's normal or average income is called

One existing government program that works much like a negative income tax is the Earned Income Tax Credit.

Table 20-14 Income Inequality in the United States The values in the table reflect the percentages of pre-tax-and transfer income. Source: US Census Bureau -Refer to Table 20-14. In 2010, what percentage of total income in the US did the bottom 20% of families have?

Economists Cox and Alm compared the gap between rich and poor and found that the richest 20% was about 2 times better off than the poorest 20% when they compared what data?

The 2011 U.S. distribution of income shows that the top 20 percent of families have approximately what share of income?

Economists who study economic mobility have found that, if a father earns 20 percent above his generation's average income, his son will most likely earn

A family's ability to buy goods and services depends largely on the family's

Which of the following is not a question that economists try to answer when measuring the distribution of income?

Government vouchers to purchase food, also known as food stamps, are an example of

The poverty line is based on the percentage of people who cannot afford an adequate diet.

Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) are examples of .

Relative to direct cash payments, in-kind transfers have the advantage of being

Medicaid and food stamps are

Which of the following statements illustrates diminishing marginal utility?

Robert Nozick criticizes Rawls's concept of justice by using an example of

Which of the following statements is correct?

Table 20-4 Source: U.S. Bureau of Census -Refer to Table 20-4. Comparing data from 2000 and 2011, which of the following statements is correct?

Raising total utility is the prime objective of which political philosophy?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

The Theory of Consumer Choice

Frontiers in Microeconomics

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