Question 1

A utilitarian government will pursue policies that redistribute income from the rich to the poor. One problem with these policies is that

Accepted Answer

A) everyone has less incentive to work hard. 
B) the rich will work harder while the poor will not. 
C) the poor will work harder while the rich will not. 
D) everyone in the middle class ends up worse off. 
A) everyone has less incentive to work hard. 
B) the rich will work harder while the poor will not. 
C) the poor will work harder while the rich will not. 
D) everyone in the middle class ends up worse off.

Question 2

Economists study poverty and income inequality to answer which of the following questions?

Accepted Answer

A) What are people's wages? 
B) How does labor-force experience affect wages? 
C) How much inequality is there in society? 
D) How do people adjust their behavior due to taxation? 
A) What are people's wages? 
B) How does labor-force experience affect wages? 
C) How much inequality is there in society? 
D) How do people adjust their behavior due to taxation?

Question 3

Which of the following statements is correct?

Accepted Answer

A) The distribution of annual income accurately reflects the distribution of living standards. 
B) Permanent incomes are more equally distributed than annual incomes. 
C) Transitory changes in income generally have a significant impact on a family's standard of living. 
D) Annual income is more equally distributed than permanent income. 
A) The distribution of annual income accurately reflects the distribution of living standards. 
B) Permanent incomes are more equally distributed than annual incomes. 
C) Transitory changes in income generally have a significant impact on a family's standard of living. 
D) Annual income is more equally distributed than permanent income.

Question 4

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 5

A society consists of three individuals: Ellie, Hakeem, and Piper. In terms of income and utility, Ellie is currently best-off, Hakeem ranks in the middle, and Piper is worst-off. Which of the following statements is correct?

Accepted Answer

A) Utilitarianism suggests that government policies should strive to maximize Piper's utility. 
B) Liberalism suggests that government policies should strive to increase Piper's utility. 
C) Libertarianism suggests that government policies should strive to improve Hakeem's utility at the cost of Ellie's utility. 
D) Libertarianism suggests that government policies should strive to make Ellie, Hakeem, and Piper equally well off. 
A) Utilitarianism suggests that government policies should strive to maximize Piper's utility. 
B) Liberalism suggests that government policies should strive to increase Piper's utility. 
C) Libertarianism suggests that government policies should strive to improve Hakeem's utility at the cost of Ellie's utility. 
D) Libertarianism suggests that government policies should strive to make Ellie, Hakeem, and Piper equally well off.

Question 6

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis. What are their respective implications for inequality in the income distribution?

Accepted Answer

Life-cycle variation in income suggests

Question 7

Jermaine believes that it is important to maximize the well-being of the worst-off person in society. He believes in the principle called the .

Accepted Answer

The answer of Jermaine believes that it is important to...

Question 8

Which of the following statements is correct?

Accepted Answer

A) A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are low-income workers. 
B) A disadvantage of a negative income tax program is that a poor person who chooses not to work many hours would not receive a cash benefit. 
C) There are no disadvantages to minimum-wage laws, negative income taxes, or the Earned Income Tax Credit (EIT
C) . 
D) A disadvantage of an Earned Income Tax Credit (EIT
C)  is that a person who is unable to work due to a disability does not benefit from the program. 
A) A disadvantage of a minimum-wage law is that it may benefit unskilled workers who are low-income workers. 
B) A disadvantage of a negative income tax program is that a poor person who chooses not to work many hours would not receive a cash benefit. 
C) There are no disadvantages to minimum-wage laws, negative income taxes, or the Earned Income Tax Credit (EIT
C) . 
D) A disadvantage of an Earned Income Tax Credit (EIT
C)  is that a person who is unable to work due to a disability does not benefit from the program.

Question 9

Even though the average income in the United States has continued to grow, the poverty rate has increased to over 20% since the early 1970s.

Accepted Answer

A) True 
 B)False

Question 10

The poverty rate is an absolute level of income set by the federal government for each family size. A family with income below this rate is deemed to be in poverty.

Accepted Answer

A) True 
 B)False

Question 11

Scenario 20-5
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 20-5. One of Zooey's friends tells her she would have more money for the year if she quit her job and filed her tax return with $0 in income. Is her friend correct? Why or why not?

Accepted Answer

No, she would have $

Question 12

A goal of libertarians is to provide citizens with equal opportunities rather than to ensure equal outcomes.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) Egypt 
B) Philippines 
C) South Africa 
D) Vietnam 
A) Egypt 
B) Philippines 
C) South Africa 
D) Vietnam

Question 14

A negative income tax system would

Accepted Answer

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

Question 15

The United States has a more unequal income distribution than many other developed countries such as Japan and Germany.

Accepted Answer

A) True 
 B)False

Question 16

Briefly describe the three prominent schools of thought in political philosophy. Identify one of the most well-known philosophers in each school.

Accepted Answer

According to utilitarianism, the governm

Question 17

Which political philosophy believes that the government should equalize the incomes of all members of society?

Accepted Answer

A) Utilitarianism 
B) Liberalism 
C) Libertarianism 
D) Utilitarianism, liberalism, and libertarianism all do not believe this. 
A) Utilitarianism 
B) Liberalism 
C) Libertarianism 
D) Utilitarianism, liberalism, and libertarianism all do not believe this.

Question 18

Table 20-1
The following table shows the distribution of income in Choochooville.
​
​
 $$\begin{array} { | c | c | } 
\hline \text { Group } & \text { Annual Family Income } \
\hline \text { Bottom Quartile } ( 25 \% ) & \$ 23,000 \text { and below } \
\hline \text { Third Quartile } & \$ 23,000 \text { to } \$ 52,999 \
\hline \text { Second Quartile } & \$ 53,000 \text { to } \$ 82,999 \
\hline \text { Top Quartile } & \$ 83,000 \text { and above } \
\hline
\end{array}$$ ​
-Refer to Table 20-1. If the poverty line were $37,448, what would be the poverty rate?

Accepted Answer

A) Between 25% and 50% 
B) Between 50% and 75% 
C) Less than 25% 
D) There is insufficient information to answer this question. 
A) Between 25% and 50% 
B) Between 50% and 75% 
C) Less than 25% 
D) There is insufficient information to answer this question.

Question 19

A U.S. family earning $80,000 would be in the top 20 percent of income distribution in 2011.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is not correct?

Accepted Answer

A) Two key elements of welfare reform are work requirements and limiting the time that recipients can receive benefits. 
B) The Earned Income Tax Credit (EIT
C)  is very similar to a negative income tax. 
C) Minimum wage laws will likely increase unemployment. 
D) The elderly are more likely to be poor than single mothers. 
A) Two key elements of welfare reform are work requirements and limiting the time that recipients can receive benefits. 
B) The Earned Income Tax Credit (EIT
C)  is very similar to a negative income tax. 
C) Minimum wage laws will likely increase unemployment. 
D) The elderly are more likely to be poor than single mothers.

Exam 20: Income Inequality and Poverty

A utilitarian government will pursue policies that redistribute income from the rich to the poor. One problem with these policies is that

Economists study poverty and income inequality to answer which of the following questions?

Which of the following statements is correct?

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

A society consists of three individuals: Ellie, Hakeem, and Piper. In terms of income and utility, Ellie is currently best-off, Hakeem ranks in the middle, and Piper is worst-off. Which of the following statements is correct?

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis. What are their respective implications for inequality in the income distribution?

Jermaine believes that it is important to maximize the well-being of the worst-off person in society. He believes in the principle called the .

Which of the following statements is correct?

Even though the average income in the United States has continued to grow, the poverty rate has increased to over 20% since the early 1970s.

The poverty rate is an absolute level of income set by the federal government for each family size. A family with income below this rate is deemed to be in poverty.

A goal of libertarians is to provide citizens with equal opportunities rather than to ensure equal outcomes.

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

A negative income tax system would

The United States has a more unequal income distribution than many other developed countries such as Japan and Germany.

Briefly describe the three prominent schools of thought in political philosophy. Identify one of the most well-known philosophers in each school.

Which political philosophy believes that the government should equalize the incomes of all members of society?

A U.S. family earning $80,000 would be in the top 20 percent of income distribution in 2011.

Which of the following statements is not correct?

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 Nations 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

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