Question 1

Choose the correct sentence.

Accepted Answer

A) Inherited wealth does not change income inequality because debts can't be forced onto the next generation. 
B) Inherited wealth can increase income inequality because debts can't be forced onto the next generation, but it can also decrease income inequality. 
C) Inherited wealth decreases income inequality because debts are forced onto the next generation. 
D) Inherited wealth decreases income inequality because on average most people inherit the same amount of money. 
E) Inherited wealth always increases income inequality because of assortative mating. 
A) Inherited wealth does not change income inequality because debts can't be forced onto the next generation. 
B) Inherited wealth can increase income inequality because debts can't be forced onto the next generation, but it can also decrease income inequality. 
C) Inherited wealth decreases income inequality because debts are forced onto the next generation. 
D) Inherited wealth decreases income inequality because on average most people inherit the same amount of money. 
E) Inherited wealth always increases income inequality because of assortative mating.

Question 2

Incomes in China and India are a small fraction of incomes in Canada. But incomes in China and India are growing at more than twice the rate of those in Canada. As a result, the inequality in income between the people in China and India and people in Canada is ________ and the world Gini ratio is ________.

Accepted Answer

A) staying relatively constant; remaining constant 
B) increasing in some years and decreasing in other years; remaining constant 
C) decreasing; decreasing 
D) increasing; increasing 
E) decreasing; increasing 
A) staying relatively constant; remaining constant 
B) increasing in some years and decreasing in other years; remaining constant 
C) decreasing; decreasing 
D) increasing; increasing 
E) decreasing; increasing

Question 3

Use the figure below to answer the following questions.
   
Figure 19.3.2
-Refer to Figure 19.3.2. At an employment level of 40 hours per week, the difference in the value of marginal product of high-skilled workers and low-skilled workers is

Accepted Answer

A) $0. 
B) $2 an hour. 
C) $6 an hour. 
D) $4 an hour. 
E) $3 an hour. 
A) $0. 
B) $2 an hour. 
C) $6 an hour. 
D) $4 an hour. 
E) $3 an hour.

Question 4

Complete the following sentence. Assortative mating

Accepted Answer

A) tends to break down barriers between the social classes. 
B) tends to increase the equality of the income distribution. 
C) tends to increase the equality of the distribution of wealth. 
D) tends to keep the income and wealth distributions from becoming more equal. 
E) occurs rarely these days due to changes in social values. 
A) tends to break down barriers between the social classes. 
B) tends to increase the equality of the income distribution. 
C) tends to increase the equality of the distribution of wealth. 
D) tends to keep the income and wealth distributions from becoming more equal. 
E) occurs rarely these days due to changes in social values.

Question 5

Which of the following three statements is true? Human capital

Accepted Answer

A) decreases your value of marginal product. 
B) lowers your wages. 
C) may reduce your income while you are accumulating it. 
D) All of the above statements are true. 
E) None of the above three statements is true. 
A) decreases your value of marginal product. 
B) lowers your wages. 
C) may reduce your income while you are accumulating it. 
D) All of the above statements are true. 
E) None of the above three statements is true.

Question 6

Use the figure below to answer the following questions.
   
Figure 19.3.2
-Refer to Figure 19.3.2. At an employment level of 20 hours per week, firms are willing to pay

Accepted Answer

A) a wage rate of $7 an hour to low-skilled workers. 
B) a maximum of $5 an hour to high-skilled workers. 
C) up to $7 an hour for high-skilled workers. 
D) the same for high-skilled workers as for low-skilled workers. 
E) $3 an hour more for high-skilled workers. 
A) a wage rate of $7 an hour to low-skilled workers. 
B) a maximum of $5 an hour to high-skilled workers. 
C) up to $7 an hour for high-skilled workers. 
D) the same for high-skilled workers as for low-skilled workers. 
E) $3 an hour more for high-skilled workers.

Question 7

A regressive income tax

Accepted Answer

A) taxes income at an average rate that decreases with income. 
B) taxes lower income people a smaller percentage than higher income people. 
C) receives more from rich people, but taxes them at the same rate as poor people. 
D) taxes everyone at the same rate. 
E) taxes income at a marginal rate that increases with rises in income. 
A) taxes income at an average rate that decreases with income. 
B) taxes lower income people a smaller percentage than higher income people. 
C) receives more from rich people, but taxes them at the same rate as poor people. 
D) taxes everyone at the same rate. 
E) taxes income at a marginal rate that increases with rises in income.

Question 8

Use the figure below to answer the following questions.
   
Figure 19.3.5
-Refer to Figure 19.3.5. This figure shows the labour supply curves and the value of marginal product curves for high-skilled and low-skilled workers. If there is an increase in the supply of high-skilled workers and the supply of high-skilled workers is now equal to the supply of low-skilled workers, then

Accepted Answer

A) wages paid to high-skilled workers would fall to $4 an hour. 
B) wages paid to high-skilled workers would fall to $5 an hour. 
C) wages paid to high-skilled workers would fall to $6 an hour. 
D) there would be no change in the wages of high-skilled workers, because high-skilled workers always earn more than low-skilled workers. 
E) there would be no change in the wages of high-skilled workers, because their value of marginal product is unchanged. 
A) wages paid to high-skilled workers would fall to $4 an hour. 
B) wages paid to high-skilled workers would fall to $5 an hour. 
C) wages paid to high-skilled workers would fall to $6 an hour. 
D) there would be no change in the wages of high-skilled workers, because high-skilled workers always earn more than low-skilled workers. 
E) there would be no change in the wages of high-skilled workers, because their value of marginal product is unchanged.

Question 9

Table 19.4.2
  
-Refer to Table 19.4.2. The table shows three tax payment schemes. Which tax payment plan has no effect on inequality?

Accepted Answer

A) Plan B 
B) Plan C 
C) Plan A 
D) Plan A and Plan C 
E) Plan B and Plan C 
A) Plan B 
B) Plan C 
C) Plan A 
D) Plan A and Plan C 
E) Plan B and Plan C

Question 10

Use the figure below to answer the following questions.
   
Figure 19.3.1
-Refer to Figure 19.3.1. For any given quantity of labour employed,

Accepted Answer

A) the elasticity of demand for high-skilled labourers is less than the elasticity of demand for low-skilled labourers. 
B) high-skilled labourers will receive a lower wage than low-skilled labourers. 
C) high-skilled labourers will receive a greater wage than low-skilled labourers. 
D) the vertical distance between the two demand curves is the compensation for the cost of acquiring the skill. 
E) the vertical distance between the two curves is the present value of human capital. 
A) the elasticity of demand for high-skilled labourers is less than the elasticity of demand for low-skilled labourers. 
B) high-skilled labourers will receive a lower wage than low-skilled labourers. 
C) high-skilled labourers will receive a greater wage than low-skilled labourers. 
D) the vertical distance between the two demand curves is the compensation for the cost of acquiring the skill. 
E) the vertical distance between the two curves is the present value of human capital.

Question 11

One criticism of social security programs such as the Guaranteed Income Supplement is that

Accepted Answer

A) it promotes efficiency rather than equity. 
B) it helps equity but hurts efficiency. 
C) it gives too much money to the elderly. 
D) it gives too much money to the poor. 
E) it gives too much money to the rich. 
A) it promotes efficiency rather than equity. 
B) it helps equity but hurts efficiency. 
C) it gives too much money to the elderly. 
D) it gives too much money to the poor. 
E) it gives too much money to the rich.

Question 12

The group that faces the weakest incentive to work are

Accepted Answer

A) those who pay the highest income tax rate. 
B) those who pay the lowest income tax rate. 
C) the middle class. 
D) households that benefit from welfare. 
E) all of the above 
A) those who pay the highest income tax rate. 
B) those who pay the lowest income tax rate. 
C) the middle class. 
D) households that benefit from welfare. 
E) all of the above

Question 13

In 2011, the mean household income in Canada was

Accepted Answer

A) $63,000. 
B) $50,700. 
C) $25,000. 
D) $48,300. 
E) $65,000. 
A) $63,000. 
B) $50,700. 
C) $25,000. 
D) $48,300. 
E) $65,000.

Question 14

Use the figure below to answer the following questions.
   
Figure 19.1.2
-Consider the Lorenz curves in Figure 19.1.2. Which point indicates that the poorest 20 percent of families earn 9 percent of the income?

Accepted Answer

A) a 
B) b 
C) c 
D) d 
E) the origin 
A) a 
B) b 
C) c 
D) d 
E) the origin

Question 15

Poverty is

Accepted Answer

A) an income below the national average income level. 
B) an income below the national median income level. 
C) a state in which a family's income is too low to be able to buy the quantities of food, shelter, and clothing that are deemed necessary. 
D) the income earned by the poorest 20 percent of households. 
E) a state in which a family spends more than 50 percent of its income on food, shelter, and clothing. 
A) an income below the national average income level. 
B) an income below the national median income level. 
C) a state in which a family's income is too low to be able to buy the quantities of food, shelter, and clothing that are deemed necessary. 
D) the income earned by the poorest 20 percent of households. 
E) a state in which a family spends more than 50 percent of its income on food, shelter, and clothing.

Question 16

In the absence of government policies to redistribute income, the income distribution will be the

Accepted Answer

A) market distribution. 
B) unfair distribution. 
C) capitalist distribution. 
D) efficient distribution. 
E) line of equality. 
A) market distribution. 
B) unfair distribution. 
C) capitalist distribution. 
D) efficient distribution. 
E) line of equality.

Question 17

Income maintenance programs include all of the following programs except

Accepted Answer

A) social security programs. 
B) workers' compensation. 
C) Canada Pension Plan. 
D) employment insurance. 
E) the minimum wage. 
A) social security programs. 
B) workers' compensation. 
C) Canada Pension Plan. 
D) employment insurance. 
E) the minimum wage.

Question 18

Use the figure below to answer the following questions.
   
Figure 19.1.2
-Which point in Figure 19.1.2 indicates that the richest 20 percent of families earn 40 percent of the income?

Accepted Answer

A) a 
B) b 
C) c 
D) d 
E) the origin 
A) a 
B) b 
C) c 
D) d 
E) the origin

Question 19

Use the figure below to answer the following question.
   
Figure 19.3.3
-Refer to Figure 19.3.3. At any given level of employment for high-skilled and low-skilled workers, the vertical distance between the two supply curves

Accepted Answer

A) disappears if there is free entry into the skill market. 
B) disappears if there is equal pay for work of equal value. 
C) is created by discrimination against low-skilled workers. 
D) is the compensation required for the cost of acquiring human capital. 
E) equals the value of marginal product of skill. 
A) disappears if there is free entry into the skill market. 
B) disappears if there is equal pay for work of equal value. 
C) is created by discrimination against low-skilled workers. 
D) is the compensation required for the cost of acquiring human capital. 
E) equals the value of marginal product of skill.

Question 20

The world distribution of income has become more equal since 1970 because

Accepted Answer

A) average incomes in poorer countries are rising much faster than average incomes in rich countries. 
B) the distribution of income within most countries has become more equal. 
C) foreign aid programs from rich nations have increased in size and especially in effectiveness. 
D) technology is used similarly in all countries. 
E) the world population is increasing. 
A) average incomes in poorer countries are rising much faster than average incomes in rich countries. 
B) the distribution of income within most countries has become more equal. 
C) foreign aid programs from rich nations have increased in size and especially in effectiveness. 
D) technology is used similarly in all countries. 
E) the world population is increasing.

Exam 19: Economic Inequality

Choose the correct sentence.

Use the figure below to answer the following questions. Figure 19.3.2 -Refer to Figure 19.3.2. At an employment level of 40 hours per week, the difference in the value of marginal product of high-skilled workers and low-skilled workers is

Complete the following sentence. Assortative mating

Which of the following three statements is true? Human capital

Use the figure below to answer the following questions. Figure 19.3.2 -Refer to Figure 19.3.2. At an employment level of 20 hours per week, firms are willing to pay

A regressive income tax

Table 19.4.2 -Refer to Table 19.4.2. The table shows three tax payment schemes. Which tax payment plan has no effect on inequality?

Use the figure below to answer the following questions. Figure 19.3.1 -Refer to Figure 19.3.1. For any given quantity of labour employed,

One criticism of social security programs such as the Guaranteed Income Supplement is that

The group that faces the weakest incentive to work are

In 2011, the mean household income in Canada was

Use the figure below to answer the following questions. Figure 19.1.2 -Consider the Lorenz curves in Figure 19.1.2. Which point indicates that the poorest 20 percent of families earn 9 percent of the income?

Poverty is

In the absence of government policies to redistribute income, the income distribution will be the

Income maintenance programs include all of the following programs except

Use the figure below to answer the following questions. Figure 19.1.2 -Which point in Figure 19.1.2 indicates that the richest 20 percent of families earn 40 percent of the income?

Use the figure below to answer the following question. Figure 19.3.3 -Refer to Figure 19.3.3. At any given level of employment for high-skilled and low-skilled workers, the vertical distance between the two supply curves

The world distribution of income has become more equal since 1970 because

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