Question 1

A progressive income tax is a tax for which the average tax rate

Accepted Answer

A) increases as income increases. 
B) becomes negative as income decreases. 
C) decreases as income increases. 
D) stays the same regardless of the income level. 
E) first slowly decreases and then rapidly increases as income increases.

Question 2

A Lorenz curve

Accepted Answer

A) is identical to the straight line sloping up at a 45° angle. 
B) lies above the straight line sloping up at a 45° angle. 
C) lies below the straight line sloping up at a 45° angle. 
D) starts below the straight line sloping up at a 45° angle and then ends above this line. 
E) starts above the straight line sloping up at a 45° angle and then ends below this line.

Question 3

Looking at the income distribution in the United States since 1970, we see that

Accepted Answer

A) only the lowest 20 percent and highest 20 percent increased their shares of income. 
B) the lower 50 percent increased its share of income and the upper 50 percent stayed the same. 
C) the highest 20 percent increased its share of income. 
D) all the 20 percent groups increased their shares of income. 
E) the lower 50 percent increased its share of income and the upper 50 percent decreased its share of income.

Question 4

-How is human capital acquired?

Accepted Answer

The answer of 
-How is human capital acquired?...

Question 5

In the United States, the poorest 20 percent of the household receive approximately ________ percent of total money income.

Accepted Answer

A) 3.3 
B) 9.5 
C) 11.8 
D) 17.6 
E) 20.0

Question 6

A Lorenz curve for income shows the

Accepted Answer

A) demand for Lorenz cough drops. 
B) average income graphed against the average number of people in the household. 
C) cumulative percentage of income graphed against cumulative percentage of households. 
D) relationship between income and wealth. 
E) total amount of income graphed against the total number of households.

Question 7

-The above table shows the distribution of income in two countries, Alpha and Beta.Based on these distributions of income,

Accepted Answer

A) Country Beta has more equal income distribution than does Country Alpha. 
B) both countries have equal distributions because 100 percent of the incomes are accounted for. 
C) the Lorenz Curve for country Beta is closer to the line of equality. 
D) Country Alpha has a more equal distribution of income than does Country Beta. 
E) It is impossible to answer the question without more information.

Question 8

Which of the following characterizes the negative income tax concept?

Accepted Answer

A) It is a flat tax that lower-income households do not pay. 
B) It is a progressive tax structure with enough deductions to provide refunds to some. 
C) It is a regressive tax with low-income earners getting a refund back when taxes are filed. 
D) It is a guaranteed annual income with earned incomes taxed at a flat rate. 
E) It is an income tax that eliminates all the inefficiency that occurs with the current tax system.

Question 9

The table gives the distribution of income in Miseria.
-What percent of income is earned by the richest 80 percent of the population?

Accepted Answer

A) 25 percent 
B) 95 percent 
C) 100 percent 
D) 5 percent 
E) More information is needed to answer the question.

Question 10

Which of the following statements is true regarding the distribution of income in the United States?

Accepted Answer

A) The Lorenz curve shows that incomes are distributed fairly. 
B) The line of equality shows that incomes are distributed equally. 
C) The inequality in the distribution of income can be seen because the Lorenz curve lies below the line of equality. 
D) The inequality in the distribution of income can be seen because the Lorenz curve lies above the line of equality. 
E) Both answers A and B are correct.

Question 11

In the United States, the poorest 20 percent of households receive about ________ percent of total money income while the richest 20 percent receive about ________ percent of total money income.

Accepted Answer

A) 3; 50 
B) 8; 71 
C) 12.; 32 
D) 13; 68 
E) 20; 20

Question 12

Of age, marital status, family size, education, and race, which is the single biggest factor affecting the household income distribution?

Accepted Answer

The answer of Of age, marital status, family size, education,...

Question 13

-The above table shows the distribution of income in two countries, Alpha and Beta.In Country Alpha, the poorest 20 percent receive ________ percent of total income.

Accepted Answer

A) 5 
B) 9 
C) 1 
D) 19 
E) 14

Question 14

Which of the following statements is correct?

Accepted Answer

A) Wealth inequality in the United States is greater than income inequality. 
B) Income inequality in the United States is greater than wealth inequality. 
C) Income includes all the things owned by a household at a certain point in time. 
D) The top fifth of households have a greater share of the nation's income than the nation's wealth. 
E) The fraction of wealth owned by the bottom 20 percent of households is larger than the fraction income earned by the bottom 20 percent of households.

Question 15

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

Accepted Answer

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

Question 16

The more costly it is to acquire a skill, the

Accepted Answer

A) more people will go to school to learn the skill. 
B) less employers are willing to pay for the skill. 
C) greater the wage differential between high-skilled and low-skilled workers. 
D) smaller the wage differential between high-skilled and low-skilled workers. 
E) the demand for workers with that skill exceeds the demand for workers without that skill.

Question 17

Other things being equal, the demand curve for low-skilled workers ________ the demand curve for high-skilled workers.

Accepted Answer

A) lies below 
B) lies above 
C) is the same as 
D) is not comparable to 
E) at high wages lies below and at low wages lies above

Question 18

-In the figure above, the nation with the highest average income is nation

Accepted Answer

A) A. 
B) B. 
C) C. 
D) The average income is the same in all three nations because their Lorenz curves can be plotted on the same diagram. 
E) It is impossible to determine with the information given.

Question 19

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.

Question 20

Which of the following statements about poverty is (are)correct?
I∙Blacks and Hispanics have higher poverty rates than whites.
Ii∙Over the last 40 years, poverty rates for all groups have generally increased.
Iii∙Most household spells of poverty last well beyond 9 months.

Accepted Answer

A) i only 
B) ii only 
C) iii only 
D) ii and iii 
E) i, ii, and iii

Exam 20: Economic Inequality