Question 1

Which of the following does not explain the rise in income inequality in the United States from 1970 to 2008?

Accepted Answer

A)  Changes in technology. 
B)  An increase in minimum wages. 
C)  A reduction in the demand for unskilled labor. 
D)  Increased international trade with low-wage countries. 
A)  Changes in technology. 
B)  An increase in minimum wages. 
C)  A reduction in the demand for unskilled labor. 
D)  Increased international trade with low-wage countries.

Question 2

Table 20-3
The Distribution of Income in Hapland
  
-Refer to Table 20-3.Where would the government in Hapland set the poverty line to have a poverty rate of 40 percent?

Accepted Answer

A)  $45,000 
B)  $60,000 
C)  $90,000 
D)  $120,000 
A)  $45,000 
B)  $60,000 
C)  $90,000 
D)  $120,000

Question 3

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

Accepted Answer

A)  Japan 
B)  Brazil 
C)  South Africa 
D)  United States 
A)  Japan 
B)  Brazil 
C)  South Africa 
D)  United States

Question 4

Table 20-9
Poverty Thresholds in 2002, 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 20-9.What is the poverty line for a family with one 35-year-old adult and one child?

Accepted Answer

A)  $8,628 
B)  $9,359 
C)  $12,353 
D)  $12,400 
A)  $8,628 
B)  $9,359 
C)  $12,353 
D)  $12,400

Question 5

Table 20-9
Poverty Thresholds in 2002, 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 20-9.What is the poverty line for a 75-year-old individual?

Accepted Answer

A)  $8,628 
B)  $9,359 
C)  $12,353 
D)  $12,400 
A)  $8,628 
B)  $9,359 
C)  $12,353 
D)  $12,400

Question 6

Scenario 20-2
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) - $20,000
-Refer to Scenario 20-2.This negative income tax would guarantee what minimum level of income to every family?

Accepted Answer

A)  $5,000 
B)  $10,000 
C)  $20,000 
D)  $40,000 
A)  $5,000 
B)  $10,000 
C)  $20,000 
D)  $40,000

Question 7

Scenario 20-1
Suppose that a society is made up of five families whose incomes are as follows:
$120,000; $90,000; $30,000; $30,000; and $18,000.
The federal government is considering two potential income tax plans:
Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over $35,000 is then redistributed equally to those families earning less than $35,000.
-Refer to Scenario 20-1.Assuming that utility is directly proportional to the cash value of after-tax income,which government policy would an advocate of libertarianism prefer?

Accepted Answer

A)  Plan A 
B)  Plan B 
C)  either Plan A or Plan B 
D)  neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophy 
A)  Plan A 
B)  Plan B 
C)  either Plan A or Plan B 
D)  neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophy

Question 8

The percentage of families with incomes below the poverty line

Accepted Answer

A)  is defined as the 10 percent of U.S.households with the lowest incomes. 
B)  is known as the poverty rate. 
C)  is known as the unemployment rate. 
D)  rises as the general income level rises. 
A)  is defined as the 10 percent of U.S.households with the lowest incomes. 
B)  is known as the poverty rate. 
C)  is known as the unemployment rate. 
D)  rises as the general income level rises.

Question 9

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 10

The distribution of income for Abbyville is as follows:  
If the poverty rate in Abbyville is 12 percent,what is the poverty line in Abbyville?

Accepted Answer

A)  $15,000. 
B)  $20,000. 
C)  $25,000. 
D)  $30,000. 
A)  $15,000. 
B)  $20,000. 
C)  $25,000. 
D)  $30,000.

Question 11

Figure 20-4
Poverty Rates by Age
  
-Refer to Figure 20-4.In 2001,the percent of adults between ages 18 and 64 in poverty is

Accepted Answer

A)  higher than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty. 
B)  higher than the percentage of children under age 18 but is lower than the percentage of elderly aged 65 and over in poverty. 
C)  is lower than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty. 
D)  is lower than the percentage of children under age 18 and is equal to the percentage of elderly aged 65 and over in poverty. 
A)  higher than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty. 
B)  higher than the percentage of children under age 18 but is lower than the percentage of elderly aged 65 and over in poverty. 
C)  is lower than both the percentage of children under age 18 and the percentage of elderly aged 65 and over in poverty. 
D)  is lower than the percentage of children under age 18 and is equal to the percentage of elderly aged 65 and over in poverty.

Question 12

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 13

Which of the following is an example of a welfare program?

Accepted Answer

A)  Temporary Assistance for Needy Families (TANF). 
B)  Capital Gains Tax (CGT). 
C)  Life Cycle Transfers (LCT). 
D)  North American Free Trade Agreement (NAFT
A) . 
A)  Temporary Assistance for Needy Families (TANF). 
B)  Capital Gains Tax (CGT). 
C)  Life Cycle Transfers (LCT). 
D)  North American Free Trade Agreement (NAFT
A) .

Question 14

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 Income)- 10,000.If a family doesn't earn any income,how does the negative income tax affect it?

Accepted Answer

A)  It will receive an income subsidy of $1,000. 
B)  It will receive an income subsidy of $3,000. 
C)  It will receive an income subsidy of $10,000. 
D)  It will not be affected at all, since the negative income tax requires a family to earn income. 
A)  It will receive an income subsidy of $1,000. 
B)  It will receive an income subsidy of $3,000. 
C)  It will receive an income subsidy of $10,000. 
D)  It will not be affected at all, since the negative income tax requires a family to earn income.

Question 15

Ms.Spring currently earns $100,000 a year,while her junior partner,Mr.Fall,earns $55,000 a year.From the perspective of a utilitarian,if both of their incomes are subject to diminishing marginal utility,taking a dollar from Ms.Spring and giving it to Mr.Fall will

Accepted Answer

A)  increase society's total utility. 
B)  lower Ms. Spring's marginal utility of income. 
C)  increase Mr. Fall's marginal utility of income. 
D)  lower society's total utility. 
A)  increase society's total utility. 
B)  lower Ms. Spring's marginal utility of income. 
C)  increase Mr. Fall's marginal utility of income. 
D)  lower society's total utility.

Question 16

Suppose the average value of in-kind transfers increases by $2,000 from 2010 to 2011.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 17

The normal life cycle pattern of income

Accepted Answer

A)  contributes to more inequality in the distribution of annual income and to more inequality in living standards. 
B)  contributes to more inequality in the distribution of annual income, but it does not necessarily contribute to more inequality in living standards. 
C)  contributes to less inequality in the distribution of annual income and to less inequality in living standards. 
D)  has no effect on either the distribution of annual income or on living standards. 
A)  contributes to more inequality in the distribution of annual income and to more inequality in living standards. 
B)  contributes to more inequality in the distribution of annual income, but it does not necessarily contribute to more inequality in living standards. 
C)  contributes to less inequality in the distribution of annual income and to less inequality in living standards. 
D)  has no effect on either the distribution of annual income or on living standards.

Question 18

Which of the following is an advantage of an in-kind transfer in comparison to a cash payment?

Accepted Answer

A)  In-kind transfers cost less to administer than cash transfers. 
B)  In-kind transfers restrict the use of the benefit; thus, recipients receive necessities such as food and health care. 
C)  In-kind transfers are more efficient than cash transfers. 
D)  In-kind transfers give the recipient more utility than cash transfers. 
A)  In-kind transfers cost less to administer than cash transfers. 
B)  In-kind transfers restrict the use of the benefit; thus, recipients receive necessities such as food and health care. 
C)  In-kind transfers are more efficient than cash transfers. 
D)  In-kind transfers give the recipient more utility than cash transfers.

Question 19

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 20

When comparing the percentage of income (or expenditure)of the lowest and highest 10 percent of the population,

Accepted Answer

A)  South Africa has a more equal income distribution than the United States. 
B)  South Africa has a more equal income distribution than Japan. 
C)  Japan has a more equal income distribution than the United States. 
D)  Mexico has a more equal income distribution than Canada. 
A)  South Africa has a more equal income distribution than the United States. 
B)  South Africa has a more equal income distribution than Japan. 
C)  Japan has a more equal income distribution than the United States. 
D)  Mexico has a more equal income distribution than Canada.

Exam 20: Income Inequality and Poverty.

Which of the following does not explain the rise in income inequality in the United States from 1970 to 2008?

Table 20-3 The Distribution of Income in Hapland -Refer to Table 20-3.Where would the government in Hapland set the poverty line to have a poverty rate of 40 percent?

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

Table 20-9 Poverty Thresholds in 2002, 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 20-9.What is the poverty line for a family with one 35-year-old adult and one child?

Table 20-9 Poverty Thresholds in 2002, 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 20-9.What is the poverty line for a 75-year-old individual?

Scenario 20-2 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) - $20,000 -Refer to Scenario 20-2.This negative income tax would guarantee what minimum level of income to every family?

The percentage of families with incomes below the poverty line

Which of the following statements is not correct?

The distribution of income for Abbyville is as follows: If the poverty rate in Abbyville is 12 percent,what is the poverty line in Abbyville?

Figure 20-4 Poverty Rates by Age -Refer to Figure 20-4.In 2001,the percent of adults between ages 18 and 64 in poverty is

The goal of liberalism is to

Which of the following is an example of a welfare program?

Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 Income)- 10,000.If a family doesn't earn any income,how does the negative income tax affect it?

Ms.Spring currently earns $100,000 a year,while her junior partner,Mr.Fall,earns $55,000 a year.From the perspective of a utilitarian,if both of their incomes are subject to diminishing marginal utility,taking a dollar from Ms.Spring and giving it to Mr.Fall will

Suppose the average value of in-kind transfers increases by $2,000 from 2010 to 2011.The poverty rate

The normal life cycle pattern of income

Which of the following is an advantage of an in-kind transfer in comparison to a cash payment?

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,

When comparing the percentage of income (or expenditure)of the lowest and highest 10 percent of the population,

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 Market For the Factors of Production.

Earnings and Discrimination.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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