Question 1

The poverty line is an absolute standard and is based on the cost of providing an adequate diet.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following does not explain why data on income distribution and the poverty rate give an incomplete picture of inequality?

Accepted Answer

A)  in-kind transfers 
B)  economic life cycle 
C)  transitory income 
D)  All of the above contribute to an incomplete picture of inequality. 
A)  in-kind transfers 
B)  economic life cycle 
C)  transitory income 
D)  All of the above contribute to an incomplete picture of inequality.

Question 3

Susan won $2,000 at the blackjack tables on her birthday.Her winnings are an example of

Accepted Answer

A)  permanent income. 
B)  life-cycle income. 
C)  transitory income. 
D)  an in-kind transfer. 
A)  permanent income. 
B)  life-cycle income. 
C)  transitory income. 
D)  an in-kind transfer.

Question 4

When we examine historical data on income inequality in the U.S.,we see that the distribution of income gradually became

Accepted Answer

A)  more equal between 1935 and 2008. 
B)  more equal between 1935 and 1973, but that trend reversed itself between 1973 and 2008. 
C)  more unequal between 1935 and 1973, but that trend reversed itself between 1973 and 2008. 
D)  more unequal between 1935 and 2008. 
A)  more equal between 1935 and 2008. 
B)  more equal between 1935 and 1973, but that trend reversed itself between 1973 and 2008. 
C)  more unequal between 1935 and 1973, but that trend reversed itself between 1973 and 2008. 
D)  more unequal between 1935 and 2008.

Question 5

The current measure of poverty,roughly three times the cost of providing an adequate diet,was established in

Accepted Answer

A)  1935. 
B)  1964. 
C)  1973. 
D)  1996. 
A)  1935. 
B)  1964. 
C)  1973. 
D)  1996.

Question 6

Figure 20-5
  
-Refer to Figure 20-5.An effective minimum wage would be set at a level

Accepted Answer

A)  above Wo, and employment would rise above Qo. 
B)  above Wo, and employment would fall below Qo. 
C)  below Wo, and employment would rise above Qo. 
D)  below Wo, and employment would fall below Qo. 
A)  above Wo, and employment would rise above Qo. 
B)  above Wo, and employment would fall below Qo. 
C)  below Wo, and employment would rise above Qo. 
D)  below Wo, and employment would fall below Qo.

Question 7

The typical economic life cycle illustrates how people tend to

Accepted Answer

A)  borrow more when they are younger and save more when they are middle-aged. 
B)  earn their peak incomes immediately prior to the typical retirement age of 65. 
C)  adjust their consumption based on changes in their transitory income. 
D)  All of the above are correct. 
A)  borrow more when they are younger and save more when they are middle-aged. 
B)  earn their peak incomes immediately prior to the typical retirement age of 65. 
C)  adjust their consumption based on changes in their transitory income. 
D)  All of the above are correct.

Question 8

The United States has less income inequality than

Accepted Answer

A)  Japan. 
B)  Canada. 
C)  Germany. 
D)  South Africa. 
A)  Japan. 
B)  Canada. 
C)  Germany. 
D)  South Africa.

Question 9

Liberalism is founded on a premise that behind a "veil of ignorance,"

Accepted Answer

A)  justice cannot be agreed upon. 
B)  everyone's income should be equal. 
C)  everyone would agree to "just" rules to reallocate income. 
D)  society should maximize the sum of individual utilities. 
A)  justice cannot be agreed upon. 
B)  everyone's income should be equal. 
C)  everyone would agree to "just" rules to reallocate income. 
D)  society should maximize the sum of individual utilities.

Question 10

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 11

The regular pattern of income variation over a person's life is called

Accepted Answer

A)  the earned income cycle. 
B)  the substitution effect. 
C)  the life cycle. 
D)  the pattern of change. 
A)  the earned income cycle. 
B)  the substitution effect. 
C)  the life cycle. 
D)  the pattern of change.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Suppose that Family A borrows money when its car breaks down and saves money when the wife receives a holiday bonus from her employer.Suppose that Family B borrows money to buy elaborate birthday presents for the children and spends the husband's holiday bonus on a vacation to Florida.Which of the following is correct?

Accepted Answer

A)  Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on transitory income. 
B)  Family A's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. Family B's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. 
C)  Family A's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. Family B's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. 
D)  Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on permanent income. 
A)  Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on transitory income. 
B)  Family A's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. Family B's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. 
C)  Family A's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. Family B's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. 
D)  Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on permanent income.

Question 14

Bill earns more than Donna.A legislator proposes taxing Bill to supplement Donna's income.A libertarian would view this proposal as

Accepted Answer

A)  a way to increase social justice. 
B)  a way to enhance Donna's income in a socially responsible way. 
C)  validation of the superiority of a libertarian maximin criterion over Rawlsian social justice. 
D)  an inappropriate role for government, since government should not redistribute income. 
A)  a way to increase social justice. 
B)  a way to enhance Donna's income in a socially responsible way. 
C)  validation of the superiority of a libertarian maximin criterion over Rawlsian social justice. 
D)  an inappropriate role for government, since government should not redistribute income.

Question 15

Of the four countries below,the country that has the most income equality is

Accepted Answer

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

Question 16

In 2008,what percentage of U.S.families had income levels below $113,205?

Accepted Answer

A)  5 percent 
B)  20 percent 
C)  80 percent 
D)  95 percent 
A)  5 percent 
B)  20 percent 
C)  80 percent 
D)  95 percent

Question 17

Outline the possible work disincentives created by anti-poverty programs.Is there a way to solve this problem without causing other forms of inefficiency to arise? Explain your answer.

Accepted Answer

A high marginal tax rate exists on welfa

Question 18

In-kind transfers are

Accepted Answer

A)  obtained only by those who have political connections. 
B)  provided only by the U. S. government. 
C)  non-monetary items given to the poor. 
D)  obtained primarily through soup kitchens and private charities. 
A)  obtained only by those who have political connections. 
B)  provided only by the U. S. government. 
C)  non-monetary items given to the poor. 
D)  obtained primarily through soup kitchens and private charities.

Question 19

Suppose a society consists of only two people,John and Jane.A utilitarian would say that the proper role of government in this society is to

Accepted Answer

A)  equalize the incomes of John and Jane. 
B)  equalize John's utility and Jane's utility. 
C)  equalize John's marginal utility and Jane's marginal utility. 
D)  maximize the sum of John's utility and Jane's utility. 
A)  equalize the incomes of John and Jane. 
B)  equalize John's utility and Jane's utility. 
C)  equalize John's marginal utility and Jane's marginal utility. 
D)  maximize the sum of John's utility and Jane's utility.

Question 20

Which of the following is most likely to occur when the government enacts policies to make the distribution of income more equal?

Accepted Answer

A)  a more efficient allocation of resources 
B)  a distortion of incentives 
C)  unchanged behavior 
D)  All of the above are correct. 
A)  a more efficient allocation of resources 
B)  a distortion of incentives 
C)  unchanged behavior 
D)  All of the above are correct.

Exam 20: Income Inequality and Poverty.

The poverty line is an absolute standard and is based on the cost of providing an adequate diet.

Which of the following does not explain why data on income distribution and the poverty rate give an incomplete picture of inequality?

Susan won $2,000 at the blackjack tables on her birthday.Her winnings are an example of

When we examine historical data on income inequality in the U.S.,we see that the distribution of income gradually became

The current measure of poverty,roughly three times the cost of providing an adequate diet,was established in

Figure 20-5 -Refer to Figure 20-5.An effective minimum wage would be set at a level

The typical economic life cycle illustrates how people tend to

The United States has less income inequality than

Liberalism is founded on a premise that behind a "veil of ignorance,"

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

The regular pattern of income variation over a person's life is called

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

Bill earns more than Donna.A legislator proposes taxing Bill to supplement Donna's income.A libertarian would view this proposal as

Of the four countries below,the country that has the most income equality is

In 2008,what percentage of U.S.families had income levels below $113,205?

Outline the possible work disincentives created by anti-poverty programs.Is there a way to solve this problem without causing other forms of inefficiency to arise? Explain your answer.

In-kind transfers are

Suppose a society consists of only two people,John and Jane.A utilitarian would say that the proper role of government in this society is to

Which of the following is most likely to occur when the government enacts policies to make the distribution of income more equal?

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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