Question 1

Explain how a "leaky bucket" can be used to illustrate the utilitarian argument that governments should not attempt to completely equalize individual incomes.

Accepted Answer

Utilitarians reject complete equalizatio

Question 2

Which of the following formulas is most representative of a negative income tax proposal?

Accepted Answer

A)  Taxes Owed = (1/4 of Income)   $2 
B)  Taxes Owed = (1/2 of Income)   3/4 
C)  Taxes Owed = (1/2 of Income) + $10,000 
D)  Taxes Owed = (1/3 of Income) - $10,000 
A)  Taxes Owed = (1/4 of Income)   $2 
B)  Taxes Owed = (1/2 of Income)   3/4 
C)  Taxes Owed = (1/2 of Income) + $10,000 
D)  Taxes Owed = (1/3 of Income) - $10,000

Question 3

Figure 20-4
Poverty Rates by Age
  
-Refer to Figure 20-4.In 1968,the percent of children under age 18 in poverty is

Accepted Answer

A)  higher than both the percentage of adults aged 18 to 64 and the percentage of elderly aged 65 and over in poverty. 
B)  higher than the percentage of adults aged 18 to 64 but is lower than the percentage of elderly aged 65 and over in poverty. 
C)  lower than both the percentage of adults aged 18 to 64 and the percentage of elderly aged 65 and over in poverty. 
D)  lower than the percentage of adults aged 18 to 64 but is higher than the percentage of elderly aged 65 and over in poverty. 
A)  higher than both the percentage of adults aged 18 to 64 and the percentage of elderly aged 65 and over in poverty. 
B)  higher than the percentage of adults aged 18 to 64 but is lower than the percentage of elderly aged 65 and over in poverty. 
C)  lower than both the percentage of adults aged 18 to 64 and the percentage of elderly aged 65 and over in poverty. 
D)  lower than the percentage of adults aged 18 to 64 but is higher than the percentage of elderly aged 65 and over in poverty.

Question 4

When considering a person's standard of living,data on the income distribution and the poverty rate may provide an incomplete picture because the poor may

Accepted Answer

A)  receive in-kind transfers. 
B)  be lending in order to smooth their income over their life cycle. 
C)  be saving in order to smooth their income due to a drop in transitory income. 
D)  under-report their income. 
A)  receive in-kind transfers. 
B)  be lending in order to smooth their income over their life cycle. 
C)  be saving in order to smooth their income due to a drop in transitory income. 
D)  under-report their income.

Question 5

Figure 20-4
Poverty Rates by Age
  
-Refer to Figure 20-4.In 2001,the percent of children under age 18 in poverty is

Accepted Answer

A)  higher than both the percentage of adults aged 18 to 64 and the percentage of elderly aged 65 years and over in poverty. 
B)  higher than the percentage of adults aged 18 to 64 but is lower than the percentage of elderly aged 65 years and over in poverty. 
C)  lower than both the percentage of adults aged18 to 64 and the percentage of elderly aged 65 years and over in poverty. 
D)  lower than the percentage of adults aged 18 to 64 but is higher than the percentage of elderly aged 65 years and over in poverty. 
A)  higher than both the percentage of adults aged 18 to 64 and the percentage of elderly aged 65 years and over in poverty. 
B)  higher than the percentage of adults aged 18 to 64 but is lower than the percentage of elderly aged 65 years and over in poverty. 
C)  lower than both the percentage of adults aged18 to 64 and the percentage of elderly aged 65 years and over in poverty. 
D)  lower than the percentage of adults aged 18 to 64 but is higher than the percentage of elderly aged 65 years and over in poverty.

Question 6

Which two of the Ten Principles of Economics are illustrated in this chapter?

Accepted Answer

A)  A country's standard of living depends on its ability to produce goods & People face tradeoffs. 
B)  Prices rise when the government prints too much money & Governments can sometimes improve market outcomes. 
C)  Governments can sometimes improve market outcomes & People face tradeoffs. 
D)  People face tradeoffs & Prices rise when the government prints too much money . 
A)  A country's standard of living depends on its ability to produce goods & People face tradeoffs. 
B)  Prices rise when the government prints too much money & Governments can sometimes improve market outcomes. 
C)  Governments can sometimes improve market outcomes & People face tradeoffs. 
D)  People face tradeoffs & Prices rise when the government prints too much money .

Question 7

What percentage of millionaires in the United States are self-made?

Accepted Answer

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

Question 8

Economic mobility in the United States is

Accepted Answer

A)  great, so many of those below the poverty line are there only temporarily. 
B)  rare, so most of those below the poverty line are there for decades. 
C)  rare, yet many of those below the poverty line are there only temporarily. 
D)  unrelated to poverty. 
A)  great, so many of those below the poverty line are there only temporarily. 
B)  rare, so most of those below the poverty line are there for decades. 
C)  rare, yet many of those below the poverty line are there only temporarily. 
D)  unrelated to poverty.

Question 9

Relative to direct cash payments,in-kind transfers have the advantage of being

Accepted Answer

A)  more politically popular. 
B)  more efficient. 
C)  more respectful of the poor. 
D)  of a higher dollar value than cash payments. 
A)  more politically popular. 
B)  more efficient. 
C)  more respectful of the poor. 
D)  of a higher dollar value than cash payments.

Question 10

The Supplemental Security Income (SSI)program focuses on the poor who are sick or disabled.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not correct?

Accepted Answer

A)  Poverty is correlated with race. 
B)  Poverty is correlated with age. 
C)  Poverty is correlated with family composition. 
D)  All of the above are correct. 
A)  Poverty is correlated with race. 
B)  Poverty is correlated with age. 
C)  Poverty is correlated with family composition. 
D)  All of the above are correct.

Question 12

Measures of poverty that fail to account for the value of in-kind transfers

Accepted Answer

A)  understate the actual poverty rate. 
B)  have little effect on the validity of reported poverty rates. 
C)  are generally more reliable measures of actual poverty rates. 
D)  overstate the actual poverty rate. 
A)  understate the actual poverty rate. 
B)  have little effect on the validity of reported poverty rates. 
C)  are generally more reliable measures of actual poverty rates. 
D)  overstate the actual poverty rate.

Question 13

If income were equally distributed among households,

Accepted Answer

A)  each household's relative share of income would increase. 
B)  each household's relative share of income would decrease. 
C)  the top fifth of households would have 50 percent of the income. 
D)  50 percent of the households would receive exactly 50 percent of the income. 
A)  each household's relative share of income would increase. 
B)  each household's relative share of income would decrease. 
C)  the top fifth of households would have 50 percent of the income. 
D)  50 percent of the households would receive exactly 50 percent of the income.

Question 14

Economists who study economic mobility have found that the income of a grandfather and his grandson's income are

Accepted Answer

A)  not closely related. 
B)  negatively related. 
C)  directly related. 
D)  equal. 
A)  not closely related. 
B)  negatively related. 
C)  directly related. 
D)  equal.

Question 15

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 utilitarianism 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 16

Raising the welfare of the worst-off person in society is an important goal of which political philosophy?

Accepted Answer

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

Question 17

The invisible hand of the marketplace acts to allocate resources efficiently,but it does not necessarily ensure that resources are allocated fairly.

Accepted Answer

A) True 
 B)False

Question 18

Raising total utility is the prime objective of which political philosophy?

Accepted Answer

A)  utilitarianism 
B)  liberalism 
C)  libertarianism 
D)  None of the above is correct. 
A)  utilitarianism 
B)  liberalism 
C)  libertarianism 
D)  None of the above is correct.

Question 19

Explain the relationship between labor earnings and the distribution of income.

Accepted Answer

A person's earnings depend on the supply

Question 20

The United States has relatively greater income

Accepted Answer

A)  inequality than developing countries but greater equality than other developed countries. 
B)  inequality than both developing and other developed countries. 
C)  equality than developing countries but greater inequality than other developed countries. 
D)  equality than both developing and other developed countries. 
A)  inequality than developing countries but greater equality than other developed countries. 
B)  inequality than both developing and other developed countries. 
C)  equality than developing countries but greater inequality than other developed countries. 
D)  equality than both developing and other developed countries.

Exam 20: Income Inequality and Poverty.

Explain how a "leaky bucket" can be used to illustrate the utilitarian argument that governments should not attempt to completely equalize individual incomes.

Which of the following formulas is most representative of a negative income tax proposal?

Figure 20-4 Poverty Rates by Age -Refer to Figure 20-4.In 1968,the percent of children under age 18 in poverty is

When considering a person's standard of living,data on the income distribution and the poverty rate may provide an incomplete picture because the poor may

Figure 20-4 Poverty Rates by Age -Refer to Figure 20-4.In 2001,the percent of children under age 18 in poverty is

Which two of the Ten Principles of Economics are illustrated in this chapter?

What percentage of millionaires in the United States are self-made?

Economic mobility in the United States is

Relative to direct cash payments,in-kind transfers have the advantage of being

The Supplemental Security Income (SSI)program focuses on the poor who are sick or disabled.

Which of the following is not correct?

Measures of poverty that fail to account for the value of in-kind transfers

If income were equally distributed among households,

Economists who study economic mobility have found that the income of a grandfather and his grandson's income are

Raising the welfare of the worst-off person in society is an important goal of which political philosophy?

The invisible hand of the marketplace acts to allocate resources efficiently,but it does not necessarily ensure that resources are allocated fairly.

Raising total utility is the prime objective of which political philosophy?

Explain the relationship between labor earnings and the distribution of income.

The United States has relatively greater income

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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