Question 1

-In the figure above, the second richest 20 percent of households receive ________ of total income.

Accepted Answer

A)  55 percent 
B)  35 percent 
C)  25 percent 
D)  45 percent

Question 2

What do the Lorenz curves for wealth and income in the United States look like? Which is closer to the line of equality?

Accepted Answer

The answer of What do the Lorenz curves for wealth...

Question 3

As a tool that is used to measure inequality in the distribution of income, the Lorenz curve graphs

Accepted Answer

A)  the cumulative percentage of income against the cumulative percentage of households. 
B)  the percentage of total income received by each given percentage of households. 
C)  the mean income, median income, and mode income against the percentage of households. 
D)  the mean income received by households over time.

Question 4

-In the above table, which tax plan is regressive?

Accepted Answer

A)  only plan A 
B)  only plan B 
C)  only plan C 
D)  both plan A and plan C

Question 5

If a tax was instituted such that every dollar collected in taxes from high income households resulted in a distribution of $.80 to low income households

Accepted Answer

A)  efficiency and equality of incomes would both decrease. 
B)  equality of incomes would increase but efficiency would decrease. 
C)  efficiency would increase but equality of incomes would decrease. 
D)  efficiency and equality of incomes would both increase.

Question 6

The Lorenz curve graphs the

Accepted Answer

A)  cumulative percentage of spending against the cumulative percentage of households. 
B)  marginal percentage of income against the marginal percentage of households. 
C)  cumulative percentage of income against the cumulative percentage of households. 
D)  cumulative percentage of spending against the marginal percentage of households.

Question 7

-The table above gives cumulative percent of income received by each 20 percent group of households. Label the axes in the figure above and then plot the Lorenz curves. In which nation is income more equally distributed?

Accepted Answer

The answer of  
 
-The table above gives cumulative...

Question 8

Welding has changed dramatically over the last decade with more welding jobs dependent on the use of computers. Computers are a complement only for high-skilled welders, so as more welding companies buy computers the wages of high-skilled welders will ________ and the wages of low-skilled welders will ________.

Accepted Answer

A)  fall; rise 
B)  rise; fall 
C)  fall; fall 
D)  rise; rise

Question 9

Assortative mating results in

Accepted Answer

A)  many people being able to marry their way out of poverty. 
B)  wealth becoming more concentrated among families. 
C)  the Lorenz curve moving rightward closer to the line of equality. 
D)  people marrying at a later age.

Question 10

-In the figure above, the line of equality is

Accepted Answer

A)  curve A. 
B)  curve B. 
C)  curve C. 
D)  curve D.

Question 11

The 2010 Federal Personal Income six tax brackets range from 10 percent for individuals earning less than $8,025 to 35 percent for those earning over $357,700. The personal income tax system is

Accepted Answer

A)  regressive. 
B)  progressive. 
C)  proportional. 
D)  flat-rate.

Question 12

The U.S. tax system

Accepted Answer

A)  reduces inequality and shifts the Lorenz curve away from the line of equality. 
B)  reduces inequality and shifts the Lorenz curve toward the line of equality. 
C)  increases inequality and shifts the Lorenz curve toward the line of equality. 
D)  increases inequality and shifts the Lorenz curve away from the line of equality.

Question 13

The decrease in the incentive to work created by welfare payments programs

Accepted Answer

A)  only affects low income taxpayers. 
B)  only affects taxpayers but not welfare recipients. 
C)  only affects high income executives. 
D)  affects both taxpayers and welfare recipients.

Question 14

Market income is

Accepted Answer

A)  profit earned in factor markets. 
B)  interest earned in factor markets. 
C)  wages, interest, rent, and profit earned in factor markets. 
D)  wages, interest, rent, and profit earned in factor markets plus cash payments made to households by government.

Question 15

-In the figure above, if income were distributed equally across all households, the richest 20 percent of households would receive ________ of total income.

Accepted Answer

A)  45 percent 
B)  25 percent 
C)  20 percent 
D)  15 percent

Question 16

Computers and laser scanners are ________ for low-skilled labor and ________ for high-skilled labor. The introduction of these technologies ________ the wage rate of high-skilled workers and ________ the wage rate of low-skilled workers.

Accepted Answer

A)  complements; substitutes; raises; lowers 
B)  substitutes; complements; lowers; raises 
C)  substitutes; complements; raises; lowers 
D)  complements; substitutes; lowers; raises

Question 17

The demand curve for high-skilled labor lies to the right of the demand curve for low-skilled labor because

Accepted Answer

A)  there are more high-skilled workers than low-skilled workers. 
B)  high-skilled workers require more compensation to convince them to work than do low-skilled workers. 
C)  high-skilled labor is more productive than low-skilled labor. 
D)  firms need not be concerned with the minimum wage in the market for high-skilled labor.

Question 18

In the United States, income is more equally distributed than measured wealth.

Accepted Answer

A) True 
 B)False

Question 19

A worker pays a tax for Social Security at a constant rate up until a certain level of income is reached. Beyond that income level, no more Social Security tax is paid. The Social Security tax is an example of a

Accepted Answer

A)  progressive tax. 
B)  regressive tax. 
C)  proportional tax. 
D)  sales tax.

Question 20

With respect to redistribution, one reason "The Big Tradeoff" exists is because

Accepted Answer

A)  government programs employ resources that could have been productive elsewhere. 
B)  government policymakers must choose between funding the various programs. 
C)  government programs only employ resources that had no value to society otherwise. 
D)  government programs only pay workers their opportunity cost.

Exam 19: Economic Inequality