Question 1

In 2010,the poverty rate in the United States level was approximately ________ percent.

Accepted Answer

A)  3 
B)  15 
C)  32 
D)  20 
E)  26 
A)  3 
B)  15 
C)  32 
D)  20 
E)  26

Question 2

If the income distribution is more unequal than the wealth distribution,then the

Accepted Answer

A)  Lorenz curve for income will be farther away from the line of equality than the Lorenz curve for wealth. 
B)  government has imposed a higher tax rate on income. 
C)  Lorenz curve for wealth will be farther away from the line of equality than the Lorenz curve for income. 
D)  Lorenz curve for wealth will lie above the Lorenz curve for income. 
E)  It is not possible to draw the Lorenz curve for wealth on the same figure with the Lorenz curve for income. 
A)  Lorenz curve for income will be farther away from the line of equality than the Lorenz curve for wealth. 
B)  government has imposed a higher tax rate on income. 
C)  Lorenz curve for wealth will be farther away from the line of equality than the Lorenz curve for income. 
D)  Lorenz curve for wealth will lie above the Lorenz curve for income. 
E)  It is not possible to draw the Lorenz curve for wealth on the same figure with the Lorenz curve for income.

Question 3

The higher the cost of acquiring skills,the ________ are the high-skilled and low-skilled labor ________ curves.

Accepted Answer

A)  closer together; demand 
B)  farther apart; demand 
C)  closer together; supply 
D)  farther apart; supply 
A)  closer together; demand 
B)  farther apart; demand 
C)  closer together; supply 
D)  farther apart; supply

Question 4

Suppose a supply curve for high-skilled labor is drawn in the same graph as a supply curve for low-skilled labor.The vertical distance between these two curves represents the

Accepted Answer

A)  wage rate paid to a high-skilled worker. 
B)  wage rate paid to a low-skilled worker. 
C)  compensation the high-skilled worker requires for the cost of acquiring the skill. 
D)  number of high-skill workers that will be hired. 
E)  difference in the value of marginal product between the high-skilled workers and the low-skilled workers. 
A)  wage rate paid to a high-skilled worker. 
B)  wage rate paid to a low-skilled worker. 
C)  compensation the high-skilled worker requires for the cost of acquiring the skill. 
D)  number of high-skill workers that will be hired. 
E)  difference in the value of marginal product between the high-skilled workers and the low-skilled workers.

Question 5

The figure above shows the demand and supply curves for high-skilled (indicated by an "H" subscript) and low-skilled (indicated by an "L" subscript) workers.
-In the figure above,the equilibrium wage differential between high-skilled workers and low-skilled workers is

Accepted Answer

A)  zero. 
B)  $5.00 or less per hour. 
C)  between $5.01 and $10.00 per hour. 
D)  between $10.01 and $20.00 per hour. 
E)  more than $20.01 per hour. 
A)  zero. 
B)  $5.00 or less per hour. 
C)  between $5.01 and $10.00 per hour. 
D)  between $10.01 and $20.00 per hour. 
E)  more than $20.01 per hour.

Question 6

In the United States,the

Accepted Answer

A)  distribution of income has become more equal since 1970. 
B)  Lorenz curve for income and the Lorenz curve for wealth are equally close to the line of equality. 
C)  Lorenz curve for income is closer to the line of equality than is the Lorenz curve for wealth. 
D)  Lorenz curve for wealth is closer to the line of equality than is the Lorenz curve for income. 
E)  None of the above answers is correct. 
A)  distribution of income has become more equal since 1970. 
B)  Lorenz curve for income and the Lorenz curve for wealth are equally close to the line of equality. 
C)  Lorenz curve for income is closer to the line of equality than is the Lorenz curve for wealth. 
D)  Lorenz curve for wealth is closer to the line of equality than is the Lorenz curve for income. 
E)  None of the above answers is correct.

Question 7

Country A has a more equal distribution of income than country B if

Accepted Answer

A)  country A's Lorenz curve is closer to the line of equality than is country B's Lorenz curve. 
B)  country B's Lorenz curve is closer to the line of equality than is country A's Lorenz curve. 
C)  country A's Lorenz curve is just as close to the line of equality as is country B's Lorenz curve. 
D)  country A's Lorenz curve lies below country B's Lorenz curve at low levels of income and above it at high levels of income. 
E)  None of the above because it is impossible to compare income inequalities across countries. 
A)  country A's Lorenz curve is closer to the line of equality than is country B's Lorenz curve. 
B)  country B's Lorenz curve is closer to the line of equality than is country A's Lorenz curve. 
C)  country A's Lorenz curve is just as close to the line of equality as is country B's Lorenz curve. 
D)  country A's Lorenz curve lies below country B's Lorenz curve at low levels of income and above it at high levels of income. 
E)  None of the above because it is impossible to compare income inequalities across countries.

Question 8

The measured inequality of annual income ________ the actual inequality of lifetime income because ________.

Accepted Answer

A)  overstates; different households are at different stages in the life cycle 
B)  overstates; the Lorenz curves differ for income and wealth 
C)  understates; people live in different geographic areas 
D)  understates; people have different levels of education 
E)  overstates; different households have different amounts of wealth 
A)  overstates; different households are at different stages in the life cycle 
B)  overstates; the Lorenz curves differ for income and wealth 
C)  understates; people live in different geographic areas 
D)  understates; people have different levels of education 
E)  overstates; different households have different amounts of wealth

Question 9

The ________ explains that the redistribution of income occurs because ________.

Accepted Answer

A)  median voter theory; a political party is more likely to retain power by enacting laws that make its supporters as well off as possible 
B)  utilitarian theory; the big tradeoff favors efficiency 
C)  excess burden theory; utilitarianism favors equality over efficiency 
D)  Lorenz curve; the lowest quintile of households receives the smallest level of benefits 
E)  progressive tax theory; higher taxes are best at equalizing income 
A)  median voter theory; a political party is more likely to retain power by enacting laws that make its supporters as well off as possible 
B)  utilitarian theory; the big tradeoff favors efficiency 
C)  excess burden theory; utilitarianism favors equality over efficiency 
D)  Lorenz curve; the lowest quintile of households receives the smallest level of benefits 
E)  progressive tax theory; higher taxes are best at equalizing income

Question 10

Discrimination

Accepted Answer

A)  can be corrected by imposing a negative income tax. 
B)  cannot explain economic inequality. 
C)  immediately results in an unequal ownership of capital. 
D)  is more likely to occur in a business where customers come into contact with minority employees. 
E)  means that the costs paid by people who discriminate are lower than otherwise. 
A)  can be corrected by imposing a negative income tax. 
B)  cannot explain economic inequality. 
C)  immediately results in an unequal ownership of capital. 
D)  is more likely to occur in a business where customers come into contact with minority employees. 
E)  means that the costs paid by people who discriminate are lower than otherwise.

Question 11

How does the supply curve of high-skilled workers compare to the supply curve of low-skilled workers?

Accepted Answer

A)  Because skills are costly to acquire, at a given wage rate the quantity supplied of high-skilled workers is greater than that of low-skilled workers. 
B)  Because skills are costly to acquire, at any given wage rate the quantity supplied of high-skilled workers is less than that of low-skilled workers. 
C)  Because skills are inexpensive to acquire, at any given wage rate the quantity supplied of high-skilled workers is less than that of low-skilled workers. 
D)  Because skills are inexpensive to acquire, at any given wage rate the quantity supplied of high-skilled workers is greater than that of low-skilled workers. 
E)  None of the above answers is correct. 
A)  Because skills are costly to acquire, at a given wage rate the quantity supplied of high-skilled workers is greater than that of low-skilled workers. 
B)  Because skills are costly to acquire, at any given wage rate the quantity supplied of high-skilled workers is less than that of low-skilled workers. 
C)  Because skills are inexpensive to acquire, at any given wage rate the quantity supplied of high-skilled workers is less than that of low-skilled workers. 
D)  Because skills are inexpensive to acquire, at any given wage rate the quantity supplied of high-skilled workers is greater than that of low-skilled workers. 
E)  None of the above answers is correct.

Question 12

-The figure above shows the market for high and low-skilled labor.Demand curve DA represents the demand for ________ labor because ________.

Accepted Answer

A)  low-skilled; low-skilled labor has a lower value of marginal product of labor than high-skilled labor 
B)  low-skilled; firms can afford to hire more low-skilled labor at lower wages 
C)  low-skilled; low-skilled labor's marginal product declines faster than high-skilled labor 
D)  high-skilled; firms cannot afford to hire as many high-skilled workers 
E)  high-skilled; high-skilled workers pay higher wages so they have lower disposable income 
A)  low-skilled; low-skilled labor has a lower value of marginal product of labor than high-skilled labor 
B)  low-skilled; firms can afford to hire more low-skilled labor at lower wages 
C)  low-skilled; low-skilled labor's marginal product declines faster than high-skilled labor 
D)  high-skilled; firms cannot afford to hire as many high-skilled workers 
E)  high-skilled; high-skilled workers pay higher wages so they have lower disposable income

Question 13

When government redistributes income,one dollar collected from a rich person translates into ________ received by a poor person.

Accepted Answer

A)  exactly one dollar 
B)  less than one dollar 
C)  more than one dollar 
D)  zero dollars 
E)  either exactly one dollar or, with some programs, more than one dollar 
A)  exactly one dollar 
B)  less than one dollar 
C)  more than one dollar 
D)  zero dollars 
E)  either exactly one dollar or, with some programs, more than one dollar

Question 14

If you attended public school in your hometown,you have received ________ because the government has provided ________.

Accepted Answer

A)  a subsidized service; a service below the cost of its production 
B)  a TANF grant; you a free education 
C)  the benefit of a negative tax; you an education without having to pay taxes 
D)  a subsidized service; a free education using a negative income tax 
E)  a utilitarian benefit; an education to help promote equality 
A)  a subsidized service; a service below the cost of its production 
B)  a TANF grant; you a free education 
C)  the benefit of a negative tax; you an education without having to pay taxes 
D)  a subsidized service; a free education using a negative income tax 
E)  a utilitarian benefit; an education to help promote equality

Question 15

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Household } \
\text { percentage }
\end{array} & \begin{array} { c } 
\text { Average income } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Percentage } \
\text { of income }
\end{array} & \begin{array} { c } 
\text { Cumulative } \
\text { percentage of } \
\text { income }
\end{array} \
\hline \text { Lowest 20 percent } & 10,000 & - & - \
\text { Second 20 percent } & 26,000 & - & - \
\text { Third 20 percent } & 38,000 & - & - \
\text { Fourth 20 percent } & 55,000 & - & - \
\text { Highest 20 percent } & 140,000 & - & - \
\hline
\end{array}$$
-The table above gives the average income received by each 20 percent group of households.Complete the table by finding the percentage of income earned by each group and the cumulative percentage of income.Label the figure below and then plot the Lorenz curve.

Accepted Answer

\[\begin{array} { c c c c } 
\begin{arra

Question 16

If all households in a nation receive the same income,the nation's Lorenz curve

Accepted Answer

A)  is horizontal. 
B)  is vertical. 
C)  is a 45° line. 
D)  runs along the horizontal axis until it reaches 50 percent of households and then runs vertically up to 100 percent of income. 
E)  runs along the horizontal axis until it reaches 100 percent of households and then runs vertically up to 100 percent of income. 
A)  is horizontal. 
B)  is vertical. 
C)  is a 45° line. 
D)  runs along the horizontal axis until it reaches 50 percent of households and then runs vertically up to 100 percent of income. 
E)  runs along the horizontal axis until it reaches 100 percent of households and then runs vertically up to 100 percent of income.

Question 17

Looking at the U.S.poverty rate by race,we see that

Accepted Answer

A)  the poverty rates by race are now equal. 
B)  whites have a higher poverty rate than do blacks. 
C)  Hispanics and blacks have a higher poverty rate than whites. 
D)  whites have a nearly zero poverty rate while Hispanics and blacks are near 20 percent. 
E)  whites and blacks have higher poverty rates than do Hispanics. 
A)  the poverty rates by race are now equal. 
B)  whites have a higher poverty rate than do blacks. 
C)  Hispanics and blacks have a higher poverty rate than whites. 
D)  whites have a nearly zero poverty rate while Hispanics and blacks are near 20 percent. 
E)  whites and blacks have higher poverty rates than do Hispanics.

Question 18

How is human capital acquired?

Accepted Answer

Human capital can be

Question 19

In the United States in 2004,the wealthiest 1 percent of households held approximately ________ percent of all wealth.

Accepted Answer

A)  1 
B)  13 
C)  27 
D)  34 
E)  88 
A)  1 
B)  13 
C)  27 
D)  34 
E)  88

Question 20

One reason economic ________ occurs is because high-skilled workers ________.

Accepted Answer

A)  inequality; have a higher value of marginal product than low-skilled workers and earn higher wages 
B)  inequality; pay higher income taxes on their higher wages 
C)  income redistribution; have a higher value of marginal product than low-skilled workers 
D)  equality; earn higher wages so firms demand less high-skilled labor 
E)  equality; have a lower value of marginal product due to higher wages 
A)  inequality; have a higher value of marginal product than low-skilled workers and earn higher wages 
B)  inequality; pay higher income taxes on their higher wages 
C)  income redistribution; have a higher value of marginal product than low-skilled workers 
D)  equality; earn higher wages so firms demand less high-skilled labor 
E)  equality; have a lower value of marginal product due to higher wages

In 2010,the poverty rate in the United States level was approximately ________ percent.

If the income distribution is more unequal than the wealth distribution,then the

The higher the cost of acquiring skills,the are the high-skilled and low-skilled labor curves.

Suppose a supply curve for high-skilled labor is drawn in the same graph as a supply curve for low-skilled labor.The vertical distance between these two curves represents the

The figure above shows the demand and supply curves for high-skilled (indicated by an "H" subscript) and low-skilled (indicated by an "L" subscript) workers. -In the figure above,the equilibrium wage differential between high-skilled workers and low-skilled workers is

In the United States,the

Country A has a more equal distribution of income than country B if

The measured inequality of annual income the actual inequality of lifetime income because .

The explains that the redistribution of income occurs because .

Discrimination

How does the supply curve of high-skilled workers compare to the supply curve of low-skilled workers?

-The figure above shows the market for high and low-skilled labor.Demand curve DA represents the demand for labor because .

When government redistributes income,one dollar collected from a rich person translates into ________ received by a poor person.

If you attended public school in your hometown,you have received because the government has provided .

If all households in a nation receive the same income,the nation's Lorenz curve

Looking at the U.S.poverty rate by race,we see that

How is human capital acquired?

In the United States in 2004,the wealthiest 1 percent of households held approximately ________ percent of all wealth.

One reason economic occurs is because high-skilled workers .

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Filters

Exam 20: Economic Inequality

In 2010,the poverty rate in the United States level was approximately ________ percent.

If the income distribution is more unequal than the wealth distribution,then the

The higher the cost of acquiring skills,the ________ are the high-skilled and low-skilled labor ________ curves.

Suppose a supply curve for high-skilled labor is drawn in the same graph as a supply curve for low-skilled labor.The vertical distance between these two curves represents the

The figure above shows the demand and supply curves for high-skilled (indicated by an "H" subscript) and low-skilled (indicated by an "L" subscript) workers. -In the figure above,the equilibrium wage differential between high-skilled workers and low-skilled workers is

In the United States,the

Country A has a more equal distribution of income than country B if

The measured inequality of annual income ________ the actual inequality of lifetime income because ________.

The ________ explains that the redistribution of income occurs because ________.

Discrimination

How does the supply curve of high-skilled workers compare to the supply curve of low-skilled workers?

-The figure above shows the market for high and low-skilled labor.Demand curve DA represents the demand for ________ labor because ________.

When government redistributes income,one dollar collected from a rich person translates into ________ received by a poor person.

If you attended public school in your hometown,you have received ________ because the government has provided ________.

If all households in a nation receive the same income,the nation's Lorenz curve

Looking at the U.S.poverty rate by race,we see that

How is human capital acquired?

In the United States in 2004,the wealthiest 1 percent of households held approximately ________ percent of all wealth.

One reason economic ________ occurs is because high-skilled workers ________.

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Filters

The higher the cost of acquiring skills,the are the high-skilled and low-skilled labor curves.

The measured inequality of annual income the actual inequality of lifetime income because .

The explains that the redistribution of income occurs because .

-The figure above shows the market for high and low-skilled labor.Demand curve DA represents the demand for labor because .

If you attended public school in your hometown,you have received because the government has provided .

One reason economic occurs is because high-skilled workers .