Question 1

The invisible hand of the marketplace acts to allocate resources

Accepted Answer

A) efficiently but does not necessarily ensure that resources are allocated fairly. 
B) both fairly and efficiently. 
C) fairly but does not necessarily ensure that resources are allocated efficiently. 
D) neither fairly nor efficiently. 
A) efficiently but does not necessarily ensure that resources are allocated fairly. 
B) both fairly and efficiently. 
C) fairly but does not necessarily ensure that resources are allocated efficiently. 
D) neither fairly nor efficiently.

Question 2

A hail storm would affect a farmer's

Accepted Answer

A) permanent income. 
B) economic life cycle income. 
C) transitory income. 
D) natural income. 
A) permanent income. 
B) economic life cycle income. 
C) transitory income. 
D) natural income.

Question 3

An example of a transitory change in income is the

Accepted Answer

A) annual cost of living adjustment to your salary. 
B) increase in income that results from a job promotion linked to your education. 
C) increase in income of California orange growers that results from an orange-killing frost in Florida. 
D) All of the above are correct. 
A) annual cost of living adjustment to your salary. 
B) increase in income that results from a job promotion linked to your education. 
C) increase in income of California orange growers that results from an orange-killing frost in Florida. 
D) All of the above are correct.

Question 4

A commonly-used gauge of poverty is the

Accepted Answer

A) income inequality rate. 
B) average income rate. 
C) poverty rate. 
D) social inequality rate. 
A) income inequality rate. 
B) average income rate. 
C) poverty rate. 
D) social inequality rate.

Question 5

Assume that the government proposes a negative income tax that calculates taxes owed by the formula,Taxes Owed = (a × Income)-
a.What is the value for "a"?
b.What is the value for "b"?
b.A family with an income of $40,000 pays $5,000 in taxes, and a family with an income of $12,000 receives an income subsidy of $2,000.
c.What is the tax liability of a family with an income of $50,000?
d.At what level of income will a family neither pay taxes, nor receive an income subsidy?

Accepted Answer

a. 0.25 or

Question 6

Income mobility studies suggest that poverty

Accepted Answer

A) cannot be alleviated by privately sponsored anti-poverty programs. 
B) cannot be alleviated by government sponsored anti-poverty programs. 
C) is a long-term problem for a relatively large number of families. 
D) is not a long-term problem for most families. 
A) cannot be alleviated by privately sponsored anti-poverty programs. 
B) cannot be alleviated by government sponsored anti-poverty programs. 
C) is a long-term problem for a relatively large number of families. 
D) is not a long-term problem for most families.

Question 7

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) 50 percent of the households would receive exactly 50 percent of the income. 
D) the rich would become richer, the poor would become poorer. 
A) each household's relative share of income would increase. 
B) each household's relative share of income would decrease. 
C) 50 percent of the households would receive exactly 50 percent of the income. 
D) the rich would become richer, the poor would become poorer.

Question 8

Diminishing marginal utility suggests that

Accepted Answer

A) more is always preferred to less. 
B) the well-being of society is maximized when the distribution of income is equal. 
C) the poor are less efficient at spending money than the rich. 
D) the poor receive more satisfaction from the last dollar spent than the rich. 
A) more is always preferred to less. 
B) the well-being of society is maximized when the distribution of income is equal. 
C) the poor are less efficient at spending money than the rich. 
D) the poor receive more satisfaction from the last dollar spent than the rich.

Question 9

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 10

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 11

According to a utilitarian,total social utility will be maximized when marginal dollars are distributed to the people with the

Accepted Answer

A) lowest marginal utility of income. 
B) highest marginal utility of income. 
C) highest total utility from their income. 
D) most productive labor resources. 
A) lowest marginal utility of income. 
B) highest marginal utility of income. 
C) highest total utility from their income. 
D) most productive labor resources.

Question 12

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

Accepted Answer

A person's earnings depend on the supply

Question 13

"Only individual members of society earn income not society itself." This statement is most closely associated with the political philosophy of a

Accepted Answer

A) utilitarian. 
B) liberal. 
C) libertarian. 
D) None of the above is correct. 
A) utilitarian. 
B) liberal. 
C) libertarian. 
D) None of the above is correct.

Question 14

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 15

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

Question 16

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 17

Economists who study economic mobility have found that,if a father earns 20 percent above his generation's average income,his son will most likely earn

Accepted Answer

A) an income equal to his generation's average income. 
B) 8 percent above his generation's average income. 
C) 5 percent below his generation's average income. 
D) 3 percent above his generation's average income. 
A) an income equal to his generation's average income. 
B) 8 percent above his generation's average income. 
C) 5 percent below his generation's average income. 
D) 3 percent above his generation's average income.

Question 18

Critics of welfare reform argue that

Accepted Answer

A) drug addition has increased among the working poor. 
B) the emphasis on work has forced many mothers into low-paying jobs while not providing adequate child care. 
C) homelessness has increased dramatically. 
D) All of the above are correct. 
A) drug addition has increased among the working poor. 
B) the emphasis on work has forced many mothers into low-paying jobs while not providing adequate child care. 
C) homelessness has increased dramatically. 
D) All of the above are correct.

Question 19

The poverty line in the country of Grinnell is $10,000.The distribution of income for Grinnell is as follows:  
The poverty rate in Grinnell is

Accepted Answer

A) 5 percent. 
B) 16.7 percent. 
C) 50 percent. 
D) 83.3 percent. 
A) 5 percent. 
B) 16.7 percent. 
C) 50 percent. 
D) 83.3 percent.

Question 20

Figure 20-2
Poverty Rates by Age
  
-Refer to Figure 20-2.From 1969 to 2001,the percent of elderly aged 64 and over in poverty has

Accepted Answer

A) declined, while the percentage of children under age 18 in poverty has also declined. 
B) declined, while the percentage of children under age 18 in poverty has increased. 
C) increased, while the percentage of children under age 18 in poverty has declined. 
D) increased, while the percentage of children under age 18 in poverty has also increased. 
A) declined, while the percentage of children under age 18 in poverty has also declined. 
B) declined, while the percentage of children under age 18 in poverty has increased. 
C) increased, while the percentage of children under age 18 in poverty has declined. 
D) increased, while the percentage of children under age 18 in poverty has also increased.

Exam 20: Income Inequality and Poverty

The invisible hand of the marketplace acts to allocate resources

A hail storm would affect a farmer's

An example of a transitory change in income is the

A commonly-used gauge of poverty is the

Income mobility studies suggest that poverty

If income were equally distributed among households,

Diminishing marginal utility suggests that

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

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

According to a utilitarian,total social utility will be maximized when marginal dollars are distributed to the people with the

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

"Only individual members of society earn income not society itself." This statement is most closely associated with the political philosophy of a

In-kind transfers are

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

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

Economists who study economic mobility have found that,if a father earns 20 percent above his generation's average income,his son will most likely earn

Critics of welfare reform argue that

The poverty line in the country of Grinnell is $10,000.The distribution of income for Grinnell is as follows: The poverty rate in Grinnell is

Figure 20-2 Poverty Rates by Age -Refer to Figure 20-2.From 1969 to 2001,the percent of elderly aged 64 and over in poverty has

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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