Question 1

The study by economists Cox and Alm found that the 2006 after-tax income of the richest fifth of U.S. households is

Accepted Answer

A) equal to the after-tax income of the poorest fifth. 
B) 7 times the after-tax income of the poorest fifth. 
C) 14 times the after-tax income of the poorest fifth. 
D) 21 times the after-tax income of the poorest fifth. 
A) equal to the after-tax income of the poorest fifth. 
B) 7 times the after-tax income of the poorest fifth. 
C) 14 times the after-tax income of the poorest fifth. 
D) 21 times the after-tax income of the poorest fifth.

Question 2

Which of the following statements is correct?

Accepted Answer

A) The poverty line is a relative standard. 
B) More families are pushed above the poverty line as economic growth pushes the entire income distribution upward. 
C) Increasing income inequality reduces poverty. 
D) Economic growth, by definition, affects all families equally. 
A) The poverty line is a relative standard. 
B) More families are pushed above the poverty line as economic growth pushes the entire income distribution upward. 
C) Increasing income inequality reduces poverty. 
D) Economic growth, by definition, affects all families equally.

Question 3

Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

Accepted Answer

A) utilitarianism 
B) liberalism 
C) libertarianism 
D) welfarism 
A) utilitarianism 
B) liberalism 
C) libertarianism 
D) welfarism

Question 4

Table 20-13
The following table shows the distribution of income in Widgetapolis.   ​
-Refer to Table 20-13. Twenty percent of all families have incomes above what level?

Accepted Answer

A) $39,000 
B) $60,000 
C) $82,000 
D) $110,000 
A) $39,000 
B) $60,000 
C) $82,000 
D) $110,000

Question 5

In the United States, long-term poverty affects

Accepted Answer

A) more families than short-term poverty. 
B) an equal number of families as short-term poverty. 
C) slightly fewer families than short-term poverty. 
D) many fewer families than short-term poverty. 
A) more families than short-term poverty. 
B) an equal number of families as short-term poverty. 
C) slightly fewer families than short-term poverty. 
D) many fewer families than short-term poverty.

Question 6

Scenario 20-2
The government is proposing switching from a progressive tax system, in which families pay 15% of the first $40,000 earned, 30% of the next $40,000 earned, and 45% of any income over $80,000 to a tax system in which every family pays 1/4 of its income regardless of how much they earn and all income redistribution is eliminated. That is, the tax revenue generated is used only for infrastructure, public administration, and national defense.
-Refer to Scenario 20-2. Which group would be most in favor of the proposed change in tax policy?

Accepted Answer

A) Liberals, because they believe in the maximin criterion. 
B) Libertarians, because they do not believe in redistributing income. 
C) Utilitarians, because they believe in diminishing marginal utility. 
D) None of the above would be in favor of the proposed change. 
A) Liberals, because they believe in the maximin criterion. 
B) Libertarians, because they do not believe in redistributing income. 
C) Utilitarians, because they believe in diminishing marginal utility. 
D) None of the above would be in favor of the proposed change.

Question 7

Table 20-11
Poverty Thresholds in 2011, by Size of Family and Number of Related Children Under 18 Years
[Dollars]   Source: U. S. Bureau of the Census, Current Population Survey.
-Refer to Table 20-11. What is the poverty line for a family of eight with two children?

Accepted Answer

A) $18,123 
B) $36,463 
C) $41,027 
D) $43,487 
A) $18,123 
B) $36,463 
C) $41,027 
D) $43,487

Question 8

Governments enact policies to

Accepted Answer

A) make the distribution of income more efficient. 
B) make the distribution of income more equal. 
C) maximize the use of the welfare system. 
D) minimize the use of in-kind transfers. 
A) make the distribution of income more efficient. 
B) make the distribution of income more equal. 
C) maximize the use of the welfare system. 
D) minimize the use of in-kind transfers.

Question 9

Figure 20-1
Number of Poor  
-Refer to Figure 20-1. Between 1965 and 2011, during recessions (the shaded bars) the number of individuals in poverty has

Accepted Answer

A) increased. 
B) decreased. 
C) not changed. 
D) decreased and then increased. 
A) increased. 
B) decreased. 
C) not changed. 
D) decreased and then increased.

Question 10

Which of the following statements accurately characterizes the effects of minimum-wage laws?

Accepted Answer

A) Some workers who might have been employed at a lower wage become unemployed. 
B) Those workers who remain employed benefit from a higher wage. 
C) The effects of minimum-wage laws depend strongly on the elasticity of demand. 
D) All of the above accurately characterize the effects of minimum-wage laws. 
A) Some workers who might have been employed at a lower wage become unemployed. 
B) Those workers who remain employed benefit from a higher wage. 
C) The effects of minimum-wage laws depend strongly on the elasticity of demand. 
D) All of the above accurately characterize the effects of minimum-wage laws.

Question 11

The poverty line is

Accepted Answer

A) established by the federal government. 
B) approximately equivalent to three times the cost of providing an adequate diet. 
C) an absolute level of income below which a family is deemed to be in poverty. 
D) All of the above are correct. 
A) established by the federal government. 
B) approximately equivalent to three times the cost of providing an adequate diet. 
C) an absolute level of income below which a family is deemed to be in poverty. 
D) All of the above are correct.

Question 12

Scenario 20-7
Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax system in which
Taxes owed = (1/4 of income) - $15,000.
-Refer to Scenario 20-7. Does Zooey owe or receive money from the government? How much?

Accepted Answer

She receiv

Question 13

Table 20-10   *A Gini coefficient is a commonly used measure of income inequality, with values between 0 and 1 (0 corresponds to perfect equality whereby everyone has exactly the same income, and 1 corresponds to perfect inequality where one person has all the income, while everyone else has zero income).
Source: The World Bank
-Refer to Table 20-10. Which country has the most equal income distribution?

Accepted Answer

A) Latvia 
B) Italy 
C) France 
D) Sweden 
A) Latvia 
B) Italy 
C) France 
D) Sweden

Question 14

Suppose the government used the following formula to compute a family's tax liability:
Taxes owed = 28% of income - $8,000. How much would a family that earned $75,000 owe?

Accepted Answer

The answer of Suppose the government used the following formula...

Question 15

The best government policy to reduce poverty is

Accepted Answer

A) a minimum wage law because the resulting unemployment is small in comparison to the benefits to people it helps. 
B) an expanded welfare program because people must have an additional "need" such as small children or a disability. 
C) an in-kind transfer because it ensures that the poor receive what they need most such as food or shelter. 
D) not obvious. Government programs to reduce poverty have many advantages but also many disadvantages. 
A) a minimum wage law because the resulting unemployment is small in comparison to the benefits to people it helps. 
B) an expanded welfare program because people must have an additional "need" such as small children or a disability. 
C) an in-kind transfer because it ensures that the poor receive what they need most such as food or shelter. 
D) not obvious. Government programs to reduce poverty have many advantages but also many disadvantages.

Question 16

Of the four countries below, which has the highest degree of income inequality?

Accepted Answer

A) Germany 
B) Turkey 
C) South Africa 
D) Mexico 
A) Germany 
B) Turkey 
C) South Africa 
D) Mexico

Question 17

Economists who support minimum-wage legislation are likely to believe that the

Accepted Answer

A) demand for unskilled labor is relatively inelastic. 
B) demand for unskilled labor is relatively elastic. 
C) supply of unskilled labor is relatively elastic. 
D) supply of unskilled labor is relatively inelastic. 
A) demand for unskilled labor is relatively inelastic. 
B) demand for unskilled labor is relatively elastic. 
C) supply of unskilled labor is relatively elastic. 
D) supply of unskilled labor is relatively inelastic.

Question 18

The economic life cycle describes how young people usually have higher savings rates than middle-aged people.

Accepted Answer

A) True 
 B)False

Question 19

Table 20-13
The following table shows the distribution of income in Widgetapolis.   ​
-Refer to Table 20-13. Eighty percent of all families have incomes below what level?

Accepted Answer

A) $39,000 
B) $60,000 
C) $82,000 
D) $110,000 
A) $39,000 
B) $60,000 
C) $82,000 
D) $110,000

Question 20

The Callaway family owns a small bait and tackle shop in a resort town in Wisconsin. An economic recession reduces the number of tourists for one summer, which reduces the family's income for that year. For the Callaway family, their

Accepted Answer

A) transitory income for the year of the recession likely exceeds their permanent income. 
B) permanent income likely exceeds their transitory income for the year of the recession. 
C) permanent income will be more affected by the recession than their transitory income. 
D) Both a and c are correct. 
A) transitory income for the year of the recession likely exceeds their permanent income. 
B) permanent income likely exceeds their transitory income for the year of the recession. 
C) permanent income will be more affected by the recession than their transitory income. 
D) Both a and c are correct.

The study by economists Cox and Alm found that the 2006 after-tax income of the richest fifth of U.S. households is

Which of the following statements is correct?

Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

Table 20-13 The following table shows the distribution of income in Widgetapolis. -Refer to Table 20-13. Twenty percent of all families have incomes above what level?

In the United States, long-term poverty affects

Table 20-11 Poverty Thresholds in 2011, by Size of Family and Number of Related Children Under 18 Years [Dollars] Source: U. S. Bureau of the Census, Current Population Survey. -Refer to Table 20-11. What is the poverty line for a family of eight with two children?

Governments enact policies to

Figure 20-1 Number of Poor -Refer to Figure 20-1. Between 1965 and 2011, during recessions (the shaded bars) the number of individuals in poverty has

Which of the following statements accurately characterizes the effects of minimum-wage laws?

The poverty line is

Suppose the government used the following formula to compute a family's tax liability: Taxes owed = 28% of income - $8,000. How much would a family that earned $75,000 owe?

The best government policy to reduce poverty is

Of the four countries below, which has the highest degree of income inequality?

Economists who support minimum-wage legislation are likely to believe that the

The economic life cycle describes how young people usually have higher savings rates than middle-aged people.

Table 20-13 The following table shows the distribution of income in Widgetapolis. -Refer to Table 20-13. Eighty percent of all families have incomes below what level?

The Callaway family owns a small bait and tackle shop in a resort town in Wisconsin. An economic recession reduces the number of tourists for one summer, which reduces the family's income for that year. For the Callaway family, their

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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Exam 20: Income Inequality and Poverty

The study by economists Cox and Alm found that the 2006 after-tax income of the richest fifth of U.S. households is

Which of the following statements is correct?

Which political philosophy focuses on the process of determining the distribution of income rather than on the outcome?

Table 20-13 The following table shows the distribution of income in Widgetapolis. ​ -Refer to Table 20-13. Twenty percent of all families have incomes above what level?

In the United States, long-term poverty affects

Table 20-11 Poverty Thresholds in 2011, by Size of Family and Number of Related Children Under 18 Years [Dollars] Source: U. S. Bureau of the Census, Current Population Survey. -Refer to Table 20-11. What is the poverty line for a family of eight with two children?

Governments enact policies to

Figure 20-1 Number of Poor -Refer to Figure 20-1. Between 1965 and 2011, during recessions (the shaded bars) the number of individuals in poverty has

Which of the following statements accurately characterizes the effects of minimum-wage laws?

The poverty line is

Suppose the government used the following formula to compute a family's tax liability: Taxes owed = 28% of income - $8,000. How much would a family that earned $75,000 owe?

The best government policy to reduce poverty is

Of the four countries below, which has the highest degree of income inequality?

Economists who support minimum-wage legislation are likely to believe that the

The economic life cycle describes how young people usually have higher savings rates than middle-aged people.

Table 20-13 The following table shows the distribution of income in Widgetapolis. ​ -Refer to Table 20-13. Eighty percent of all families have incomes below what level?

The Callaway family owns a small bait and tackle shop in a resort town in Wisconsin. An economic recession reduces the number of tourists for one summer, which reduces the family's income for that year. For the Callaway family, their

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

Filters

Table 20-13 The following table shows the distribution of income in Widgetapolis. -Refer to Table 20-13. Twenty percent of all families have incomes above what level?

Table 20-13 The following table shows the distribution of income in Widgetapolis. -Refer to Table 20-13. Eighty percent of all families have incomes below what level?