Question 1

Which of the Ten Principles of Economics do governments run into when they redistribute income to achieve greater equality?

Accepted Answer

A) Trade can make everyone better off. 
B) The cost of something is what you give up to get it. 
C) People face trade-offs. 
D) Markets are usually a good way to organize economic activity. 
A) Trade can make everyone better off. 
B) The cost of something is what you give up to get it. 
C) People face trade-offs. 
D) Markets are usually a good way to organize economic activity.

Question 2

Table 20-13
Distribution of Income in Imagination  
-Refer to Table 20-13. If the poverty rate in Imagination is 10%, what is the poverty line?

Accepted Answer

The answer of Table 20-13
Distribution of Income in Imagination ...

Question 3

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 4

Supplemental Security Income (SSI) is a type of

Accepted Answer

A) in-kind transfer. 
B) minimum wage law. 
C) private charity. 
D) welfare payment. 
A) in-kind transfer. 
B) minimum wage law. 
C) private charity. 
D) welfare payment.

Question 5

Standard measurements of the degree of income inequality take both money income and in-kind transfers into account.

Accepted Answer

A) True 
 B)False

Question 6

Table 20-14
James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income.   ​
​
-Refer to Table 20-14. According to the table, what percentage of individuals in Marketsville have an income below $64,000?

Accepted Answer

A) 20 percent 
B) 40 percent 
C) 60 percent 
D) 80 percent 
A) 20 percent 
B) 40 percent 
C) 60 percent 
D) 80 percent

Question 7

Which of the following statements is not correct?

Accepted Answer

A) The poverty line is an absolute level of income set by the federal government below which a family is considered to be in poverty. 
B) The poverty line is approximately equal to three times the cost of providing an adequate diet. 
C) The poverty line is adjusted annually to reflect changes in price levels. 
D) The poverty line is adjusted semiannually to reflect changes in fuel prices. 
A) The poverty line is an absolute level of income set by the federal government below which a family is considered to be in poverty. 
B) The poverty line is approximately equal to three times the cost of providing an adequate diet. 
C) The poverty line is adjusted annually to reflect changes in price levels. 
D) The poverty line is adjusted semiannually to reflect changes in fuel prices.

Question 8

Which of the following represents a problem in measuring inequality?

Accepted Answer

A) Measurements of income distributions typically include in-kind transfers, which distort the measure of inequality. 
B) A normal life-cycle pattern causes inequality in the income distribution but may not reflect inequality in living standards. 
C) Transitory income is a better measure of inequality than permanent income. 
D) Both a and b are correct. 
A) Measurements of income distributions typically include in-kind transfers, which distort the measure of inequality. 
B) A normal life-cycle pattern causes inequality in the income distribution but may not reflect inequality in living standards. 
C) Transitory income is a better measure of inequality than permanent income. 
D) Both a and b are correct.

Question 9

Government programs that take money from high-income people and give it to low-income people typically

Accepted Answer

A) improve economic efficiency by reducing poverty. 
B) reduce economic efficiency because they distort incentives. 
C) have no effect on economic efficiency because they both reduce poverty and distort incentives. 
D) sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency. 
A) improve economic efficiency by reducing poverty. 
B) reduce economic efficiency because they distort incentives. 
C) have no effect on economic efficiency because they both reduce poverty and distort incentives. 
D) sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency.

Question 10

The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility.

Accepted Answer

A) True 
 B)False

Question 11

Table 20-14
James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income.   ​
​
-Refer to Table 20-14. Where would the government of Marketsville set the poverty line to have a poverty rate of 20 percent?

Accepted Answer

A) $23,000 
B) $35,000 
C) $44,000 
D) $55,000 
A) $23,000 
B) $35,000 
C) $44,000 
D) $55,000

Question 12

Which of the following is not correct?

Accepted Answer

A) A negative income tax only applies to working people, so it encourages people to get full-time work. 
B) Supporters advocate the use of the Earned Income Tax Credit as a way to help the working poor. 
C) A negative income tax subsidizes the incomes of poor people. 
D) An advantage of a negative income tax is that it is not based on the number of children, so it does not provide incentives for unmarried women to have children. 
A) A negative income tax only applies to working people, so it encourages people to get full-time work. 
B) Supporters advocate the use of the Earned Income Tax Credit as a way to help the working poor. 
C) A negative income tax subsidizes the incomes of poor people. 
D) An advantage of a negative income tax is that it is not based on the number of children, so it does not provide incentives for unmarried women to have children.

Question 13

Which of the following is not an example of in-kind transfers?

Accepted Answer

A) food stamps 
B) Medicaid 
C) the Earned Income Tax Credit 
D) housing vouchers 
A) food stamps 
B) Medicaid 
C) the Earned Income Tax Credit 
D) housing vouchers

Question 14

A negative income tax system is designed to

Accepted Answer

A) provide in-kind benefits to the poor. 
B) provide a minimum income to the poor. 
C) reduce taxes on the rich when their incomes surpass the maximum income tax bracket. 
D) subsidize food consumption in poor families. 
A) provide in-kind benefits to the poor. 
B) provide a minimum income to the poor. 
C) reduce taxes on the rich when their incomes surpass the maximum income tax bracket. 
D) subsidize food consumption in poor families.

Question 15

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 16

In 2011, what percentage of U.S. families had income levels above $115,866?

Accepted Answer

A) 10 percent 
B) 20 percent 
C) 60 percent 
D) 80 percent 
A) 10 percent 
B) 20 percent 
C) 60 percent 
D) 80 percent

Question 17

Figure 20-1
Number of Poor  
-Refer to Figure 20-1. Between 1959 and 2011 the poverty rate has

Accepted Answer

A) increased overall. 
B) decreased overall. 
C) stayed the same overall. 
D) moved in the opposite direction of the number of people in poverty. 
A) increased overall. 
B) decreased overall. 
C) stayed the same overall. 
D) moved in the opposite direction of the number of people in poverty.

Question 18

One existing government program that works much like a negative income tax is Medicaid.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the average value of in-kind transfers increases by $2,000 from 2013 to 2014. The poverty rate

Accepted Answer

A) is more likely to understate the true level of poverty. 
B) is more likely to overstate the true level of poverty. 
C) will increase by $2,000 divided by the poverty level. 
D) Both b and c are correct. 
A) is more likely to understate the true level of poverty. 
B) is more likely to overstate the true level of poverty. 
C) will increase by $2,000 divided by the poverty level. 
D) Both b and c are correct.

Question 20

Liberalism is the political philosophy espoused by

Accepted Answer

A) Robert Nozick. 
B) John Stuart Mill. 
C) John Rawls. 
D) Jeremy Bentham. 
A) Robert Nozick. 
B) John Stuart Mill. 
C) John Rawls. 
D) Jeremy Bentham.

Exam 20: Income Inequality and Poverty

Which of the Ten Principles of Economics do governments run into when they redistribute income to achieve greater equality?

Table 20-13 Distribution of Income in Imagination -Refer to Table 20-13. If the poverty rate in Imagination is 10%, what is the poverty line?

Supplemental Security Income (SSI) is a type of

Standard measurements of the degree of income inequality take both money income and in-kind transfers into account.

Table 20-14 James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income. ​ ​ -Refer to Table 20-14. According to the table, what percentage of individuals in Marketsville have an income below $64,000?

Which of the following statements is not correct?

Which of the following represents a problem in measuring inequality?

Government programs that take money from high-income people and give it to low-income people typically

The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility.

Table 20-14 James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income. ​ ​ -Refer to Table 20-14. Where would the government of Marketsville set the poverty line to have a poverty rate of 20 percent?

Which of the following is not correct?

Which of the following is not an example of in-kind transfers?

A negative income tax system is designed to

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

In 2011, what percentage of U.S. families had income levels above $115,866?

Figure 20-1 Number of Poor -Refer to Figure 20-1. Between 1959 and 2011 the poverty rate has

One existing government program that works much like a negative income tax is Medicaid.

Suppose the average value of in-kind transfers increases by $2,000 from 2013 to 2014. The poverty rate

Liberalism is the political philosophy espoused by

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Table 20-14 James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income. -Refer to Table 20-14. According to the table, what percentage of individuals in Marketsville have an income below $64,000?

Table 20-14 James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income. -Refer to Table 20-14. Where would the government of Marketsville set the poverty line to have a poverty rate of 20 percent?