Question 1

When John F. Kennedy said, "A rising tide lifts all boats," to what was he referring?

Accepted Answer

A)  With government intervention, all citizens receive a greater allocation of resources. 
B)  With market forces working independently, everyone receives an equitable share of resources. 
C)  With economic growth, more families are pushed above the poverty line. 
D)  None of the above are correct. 
A)  With government intervention, all citizens receive a greater allocation of resources. 
B)  With market forces working independently, everyone receives an equitable share of resources. 
C)  With economic growth, more families are pushed above the poverty line. 
D)  None of the above are correct.

Question 2

Which of the following statements accurately characterizes the effects of minimum-wage laws?

Accepted Answer

A)  Some workers who might have been employed at a lower wage become unemployed. 
B)  Those workers who remain employed benefit from a higher wage. 
C)  The effects of minimum-wage laws depend strongly on the elasticity of demand. 
D)  All of the above accurately characterize the effects of minimum-wage laws. 
A)  Some workers who might have been employed at a lower wage become unemployed. 
B)  Those workers who remain employed benefit from a higher wage. 
C)  The effects of minimum-wage laws depend strongly on the elasticity of demand. 
D)  All of the above accurately characterize the effects of minimum-wage laws.

Question 3

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 4

The percentage of families with incomes below the poverty line

Accepted Answer

A)  is defined as the 10 percent of U.S.households with the lowest incomes. 
B)  is known as the poverty rate. 
C)  is known as the unemployment rate. 
D)  rises as the general income level rises. 
A)  is defined as the 10 percent of U.S.households with the lowest incomes. 
B)  is known as the poverty rate. 
C)  is known as the unemployment rate. 
D)  rises as the general income level rises.

Question 5

Which of the following statements illustrates diminishing marginal utility?

Accepted Answer

A)  An extra dollar of income to a poor person provides that person with more additional utility than does an extra dollar to a rich person. 
B)  An extra dollar of income to a poor person provides that person with less additional utility than does an extra dollar to a rich person. 
C)  An extra dollar of income to a poor person provides that person with the same additional utility as does an extra dollar to a rich person. 
D)  An extra dollar of income to a poor person provides that person with the same total utility as does an extra dollar to a rich person. 
A)  An extra dollar of income to a poor person provides that person with more additional utility than does an extra dollar to a rich person. 
B)  An extra dollar of income to a poor person provides that person with less additional utility than does an extra dollar to a rich person. 
C)  An extra dollar of income to a poor person provides that person with the same additional utility as does an extra dollar to a rich person. 
D)  An extra dollar of income to a poor person provides that person with the same total utility as does an extra dollar to a rich person.

Question 6

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 7

Scenario 20-3
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 20-3. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of liberalism 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 8

The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility.

Accepted Answer

A) True 
 B)False

Question 9

The distribution of income for Inequalia is as follows: Number of Families Income     200 less than $5,000
300 between $5,000 and $10,000
500 between $10,000 and $15,000
700 between $15,000 and $20,000
300 over $20,000   If the poverty rate in Inequalia is 25 percent, what is the poverty line in Inequalia?

Accepted Answer

A)  $5,000 
B)  $10,000 
C)  $15,000 
D)  $20,000 
A)  $5,000 
B)  $10,000 
C)  $15,000 
D)  $20,000

Question 10

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

Accepted Answer

A)  a way to improve the welfare of all in society. 
B)  a way to enhance Antonio's income in a socially responsible way. 
C)  validation of the role of diminishing marginal utility over the maximin criterion. 
D)  an inappropriate role for government, since government should not redistribute income. 
A)  a way to improve the welfare of all in society. 
B)  a way to enhance Antonio's income in a socially responsible way. 
C)  validation of the role of diminishing marginal utility over the maximin criterion. 
D)  an inappropriate role for government, since government should not redistribute income.

Question 11

Which of the following is not a characteristic of the Earned Income Tax Credit (EITC)?

Accepted Answer

A)  It does not discourage recipients from working. 
B)  It is less distortionary than other anti-poverty programs. 
C)  It helps the disabled who cannot work. 
D)  It applies only to the working poor. 
A)  It does not discourage recipients from working. 
B)  It is less distortionary than other anti-poverty programs. 
C)  It helps the disabled who cannot work. 
D)  It applies only to the working poor.

Question 12

If the imposition of a binding minimum wage results in much higher unemployment among workers seeking minimum wage jobs,

Accepted Answer

A)  firms will respond by demanding more labor. 
B)  those workers who are employed will be worse off than before the minimum wage law. 
C)  labor demand is relatively elastic. 
D)  labor demand is relatively inelastic. 
A)  firms will respond by demanding more labor. 
B)  those workers who are employed will be worse off than before the minimum wage law. 
C)  labor demand is relatively elastic. 
D)  labor demand is relatively inelastic.

Question 13

Which of the following is correct?

Accepted Answer

A)  Incomes tend to be high for young workers. 
B)  Incomes tend to rise sharply at retirement. 
C)  Incomes tend to peak at around age 50. 
D)  Current income is more equally distributed than permanent income. 
A)  Incomes tend to be high for young workers. 
B)  Incomes tend to rise sharply at retirement. 
C)  Incomes tend to peak at around age 50. 
D)  Current income is more equally distributed than permanent income.

Question 14

Scenario 20-7
Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax system in which Taxes owed = (1/4 of income) - $15,000.
-Refer to Scenario 20-7. Zooey's friend Alfredo owes $0 in taxes. How much does he earn?

Accepted Answer

The answer of Scenario 20-7
Zooey is a single mother of...

Question 15

A system in which anyone collecting antipoverty program benefits must accept a government-provided job is called .

Accepted Answer

The answer of A system in which anyone collecting antipoverty...

Question 16

What percent of families are poor for eight or more years?

Accepted Answer

A)  more than 20 percent 
B)  between 15 and 20 percent 
C)  approximately 10 percent 
D)  less than 3 percent 
A)  more than 20 percent 
B)  between 15 and 20 percent 
C)  approximately 10 percent 
D)  less than 3 percent

Question 17

Which political philosophy argues that the government should choose policies to maximize the total utility of everyone in society?

Accepted Answer

The answer of Which political philosophy argues that the government...

Question 18

Governments enact policies to

Accepted Answer

A)  make the distribution of income more efficient. 
B)  make the distribution of income more equal. 
C)  maximize the use of the welfare system. 
D)  minimize the use of in-kind transfers. 
A)  make the distribution of income more efficient. 
B)  make the distribution of income more equal. 
C)  maximize the use of the welfare system. 
D)  minimize the use of in-kind transfers.

Question 19

Many economists believe that a family bases its spending decisions on its permanent, or average, income rather than on transitory income.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is not correct?

Accepted Answer

A)  Welfare programs may encourage illegitimate births. 
B)  The decline in welfare benefits since the 1970s has been associated with a decline in the percentage of children living with a single parent. 
C)  Welfare programs may reduce incentives for people to work. 
D)  A negative income tax program uses tax revenues collected from high-income families to provide cash subsidies to low-income families. 
A)  Welfare programs may encourage illegitimate births. 
B)  The decline in welfare benefits since the 1970s has been associated with a decline in the percentage of children living with a single parent. 
C)  Welfare programs may reduce incentives for people to work. 
D)  A negative income tax program uses tax revenues collected from high-income families to provide cash subsidies to low-income families.

Exam 20: Income Inequality and Poverty

When John F. Kennedy said, "A rising tide lifts all boats," to what was he referring?

Which of the following statements accurately characterizes the effects of minimum-wage laws?

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

The percentage of families with incomes below the poverty line

Which of the following statements illustrates diminishing marginal utility?

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.

The utilitarian justification for redistributing income is based on the assumption of diminishing marginal utility.

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

Which of the following is not a characteristic of the Earned Income Tax Credit (EITC)?

If the imposition of a binding minimum wage results in much higher unemployment among workers seeking minimum wage jobs,

Which of the following is correct?

A system in which anyone collecting antipoverty program benefits must accept a government-provided job is called .

What percent of families are poor for eight or more years?

Which political philosophy argues that the government should choose policies to maximize the total utility of everyone in society?

Governments enact policies to

Many economists believe that a family bases its spending decisions on its permanent, or average, income rather than on transitory income.

Which of the following statements is not correct?

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 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

Six Debates Over Macroeconomic Policy

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