Question 1

Explain the concept of diminishing marginal utility, and describe the role that it plays in the utilitarian argument for the redistribution of income.

Accepted Answer

Diminishing marginal utility refers to t

Question 2

In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,

Accepted Answer

A) the costs of welfare programs will exceed the benefits. 
B) it should not try to reach complete equality in income. 
C) income equality will be the best policy option. 
D) equality of economic opportunity will reduce society's utility. 
A) the costs of welfare programs will exceed the benefits. 
B) it should not try to reach complete equality in income. 
C) income equality will be the best policy option. 
D) equality of economic opportunity will reduce society's utility.

Question 3

Which of the following statements is not correct?

Accepted Answer

A) Libertarians are opposed to redistributing income. 
B) Critics of the welfare system argue that it breaks up families. 
C) One of the problems with measuring income inequality is valuing in-kind transfers. 
D) Utilitarians believe that the government should punish crimes but should not redistribute income. 
A) Libertarians are opposed to redistributing income. 
B) Critics of the welfare system argue that it breaks up families. 
C) One of the problems with measuring income inequality is valuing in-kind transfers. 
D) Utilitarians believe that the government should punish crimes but should not redistribute income.

Question 4

Table 20-13
The following table shows the distribution of income in Widgetapolis.   ​
-Refer to Table 20-13. If the poverty line were $45,141, what would be the poverty rate?

Accepted Answer

A) less than 20% 
B) between 20% and 40% 
C) between 40% and 60% 
D) between 60% and 80% 
A) less than 20% 
B) between 20% and 40% 
C) between 40% and 60% 
D) between 60% and 80%

Question 5

What measure does the federal government use when setting the official poverty line in the US?

Accepted Answer

three times the cost

Question 6

Table 20-13
The following table shows the distribution of income in Widgetapolis.   ​
-Refer to Table 20-13. If the poverty rate is 33%, where is the poverty line in Widgetapolis?

Accepted Answer

A) under $39,000 
B) between $39,000 and $59,999 
C) between $60,000 and $81,999 
D) between $82,000 and $109,999 
A) under $39,000 
B) between $39,000 and $59,999 
C) between $60,000 and $81,999 
D) between $82,000 and $109,999

Question 7

Which group (or groups) would be the most upset by wide variation in the income distribution?

Accepted Answer

A) utilitarians 
B) utilitarians and liberals 
C) libertarians 
D) liberals and libertarians 
A) utilitarians 
B) utilitarians and liberals 
C) libertarians 
D) liberals and libertarians

Question 8

In the United States approximately 80 percent of millionaires did not inherit their wealth. This illustrates the

Accepted Answer

A) amount of transitory income in the United States. 
B) effectiveness of government anti-poverty programs in the United States. 
C) great economic mobility in the United States. 
D) level of permanent income in the United States. 
A) amount of transitory income in the United States. 
B) effectiveness of government anti-poverty programs in the United States. 
C) great economic mobility in the United States. 
D) level of permanent income in the United States.

Question 9

"The government should punish crimes and enforce voluntary agreements but not redistribute income." This statement is most closely associated with which political philosophy?

Accepted Answer

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

Question 10

A negative income tax system would

Accepted Answer

A) make taxes more regressive. 
B) sever the link between tax policy and income distribution. 
C) collect from high-income households and give transfers to low-income households. 
D) eliminate progressive tax rates. 
A) make taxes more regressive. 
B) sever the link between tax policy and income distribution. 
C) collect from high-income households and give transfers to low-income households. 
D) eliminate progressive tax rates.

Question 11

When the government redistributes income to achieve greater equality, it

Accepted Answer

A) distorts incentives. 
B) improves efficiency. 
C) focuses on middle income brackets. 
D) relies on foreign aid to help balance the budget. 
A) distorts incentives. 
B) improves efficiency. 
C) focuses on middle income brackets. 
D) relies on foreign aid to help balance the budget.

Question 12

Caroline earns more than John. Under a new tax system, some of the taxes paid by Caroline would go to John. A libertarian would

Accepted Answer

A) support the system because an extra dollar earned by Caroline would be worth less to her than an extra dollar given to John. 
B) oppose the system if it redistributed income in the presence of equal opportunity. 
C) oppose the system because an extra dollar earned by Caroline would be worth more to her than an extra dollar given to John. 
D) support the system if it maximized the well-being of the poorest member of society. 
A) support the system because an extra dollar earned by Caroline would be worth less to her than an extra dollar given to John. 
B) oppose the system if it redistributed income in the presence of equal opportunity. 
C) oppose the system because an extra dollar earned by Caroline would be worth more to her than an extra dollar given to John. 
D) support the system if it maximized the well-being of the poorest member of society.

Question 13

Scenario 20-4
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/5 of income) - $15,000
-Refer to Scenario 20-4. A family earning $50,000 before taxes would have how much after-tax income?

Accepted Answer

A) -$5,000 
B) $40,000 
C) $45,000 
D) $55,000 
A) -$5,000 
B) $40,000 
C) $45,000 
D) $55,000

Question 14

In general, which of the following would libertarians argue is more important than equal outcomes?

Accepted Answer

A) equal opportunities 
B) equal incomes 
C) providing a social safety net 
D) offering the opportunity to purchase social insurance 
A) equal opportunities 
B) equal incomes 
C) providing a social safety net 
D) offering the opportunity to purchase social insurance

Question 15

Suppose that Angelo and Sonia each win $500 in a charity raffle. Angelo spends his winnings on a new ipad. Sonia saves her winnings. Which of the following is correct?

Accepted Answer

A) Both Angelo's and Sonia's behavior suggest that they base their purchasing decisions on transitory income. 
B) Angelo's behavior suggests that he bases his purchasing decisions on transitory income rather than permanent income. Sonia's behavior suggest that she bases her purchasing decisions on permanent income rather than transitory income. 
C) Angelo's behavior suggests that he bases his purchasing decisions on permanent income rather than transitory income. Sonia's behavior suggests that she bases her purchasing decisions on transitory income rather than permanent income. 
D) Both Angelo's and Sonia's behavior suggest that they base their purchasing decisions on permanent income. 
A) Both Angelo's and Sonia's behavior suggest that they base their purchasing decisions on transitory income. 
B) Angelo's behavior suggests that he bases his purchasing decisions on transitory income rather than permanent income. Sonia's behavior suggest that she bases her purchasing decisions on permanent income rather than transitory income. 
C) Angelo's behavior suggests that he bases his purchasing decisions on permanent income rather than transitory income. Sonia's behavior suggests that she bases her purchasing decisions on transitory income rather than permanent income. 
D) Both Angelo's and Sonia's behavior suggest that they base their purchasing decisions on permanent income.

Question 16

Scenario 20-8
Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $14,000
​
​
-Refer to Scenario 20-8. The government does not receive any tax revenue through this negative income tax if the family with the highest income earns $56,000.

Accepted Answer

A) True 
 B)False

Question 17

The goal of liberalism is to

Accepted Answer

A) redistribute income based on the assumption of diminishing marginal utility. 
B) redistribute income in order to improve the well-being of the worst-off person in society. 
C) punish crimes and enforce voluntary agreements but not to redistribute income. 
D) measure happiness and satisfaction. 
A) redistribute income based on the assumption of diminishing marginal utility. 
B) redistribute income in order to improve the well-being of the worst-off person in society. 
C) punish crimes and enforce voluntary agreements but not to redistribute income. 
D) measure happiness and satisfaction.

Question 18

A binding minimum wage

Accepted Answer

A) affects employees but not employers. 
B) lowers the productivity of workers. 
C) raises the cost of labor to firms. 
D) All of the above are correct. 
A) affects employees but not employers. 
B) lowers the productivity of workers. 
C) raises the cost of labor to firms. 
D) All of the above are correct.

Question 19

Table 20-9
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 20-9. Which of the following statements best describes the trends in the table?

Accepted Answer

A) From 1980 to 2010, the distribution of income has become less equal. 
B) From 1980 to 2010, the distribution of income has remained the same. 
C) From 1980 to 2010, the distribution of income has become more equal. 
D) None of the above is correct. 
A) From 1980 to 2010, the distribution of income has become less equal. 
B) From 1980 to 2010, the distribution of income has remained the same. 
C) From 1980 to 2010, the distribution of income has become more equal. 
D) None of the above is correct.

Question 20

Table 20-5
Distribution of Income in Umakastan  
-Refer to Table 20-5. If the poverty rate in Umakastan is 10%, what is the poverty line?

Accepted Answer

A) $18,750 
B) $20,000 
C) $34,690 
D) $38,000 
A) $18,750 
B) $20,000 
C) $34,690 
D) $38,000

Exam 20: Income Inequality and Poverty

Explain the concept of diminishing marginal utility, and describe the role that it plays in the utilitarian argument for the redistribution of income.

In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,

Which of the following statements is not correct?

Table 20-13 The following table shows the distribution of income in Widgetapolis. ​ -Refer to Table 20-13. If the poverty line were $45,141, what would be the poverty rate?

What measure does the federal government use when setting the official poverty line in the US?

Table 20-13 The following table shows the distribution of income in Widgetapolis. ​ -Refer to Table 20-13. If the poverty rate is 33%, where is the poverty line in Widgetapolis?

Which group (or groups) would be the most upset by wide variation in the income distribution?

In the United States approximately 80 percent of millionaires did not inherit their wealth. This illustrates the

"The government should punish crimes and enforce voluntary agreements but not redistribute income." This statement is most closely associated with which political philosophy?

A negative income tax system would

When the government redistributes income to achieve greater equality, it

Caroline earns more than John. Under a new tax system, some of the taxes paid by Caroline would go to John. A libertarian would

Scenario 20-4 Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability: Taxes owed = (1/5 of income) - $15,000 -Refer to Scenario 20-4. A family earning $50,000 before taxes would have how much after-tax income?

In general, which of the following would libertarians argue is more important than equal outcomes?

Suppose that Angelo and Sonia each win $500 in a charity raffle. Angelo spends his winnings on a new ipad. Sonia saves her winnings. Which of the following is correct?

The goal of liberalism is to

A binding minimum wage

Table 20-9 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 20-9. Which of the following statements best describes the trends in the table?

Table 20-5 Distribution of Income in Umakastan -Refer to Table 20-5. If the poverty rate in Umakastan is 10%, what is the poverty line?

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. If the poverty line were $45,141, what would be the poverty rate?

Table 20-13 The following table shows the distribution of income in Widgetapolis. -Refer to Table 20-13. If the poverty rate is 33%, where is the poverty line in Widgetapolis?