Question 1

Critics of the minimum wage argue that

Accepted Answer

A)   labor demand is inelastic so firms can adjust production.
B)   too many older employees benefit at the expense of teenage workers.
C)   many minimum-wage earners are teenagers from middle-class families.
D)   All of the above are correct. C

Question 2

Table 20-6 
-Refer to Table 20-6. A person who is concerned that income inequality has worsened between 2011 and 2012 would cite which of the following statistics to support her position?

Accepted Answer

A)   The percentage of people earning less than $25,000 decreased from 2011 to 2012.
B)   The percentage of people earning more than $100,000 increased from 2011 to 2012.
C)   The percentage of people earning between $50,000 and $100,000 stayed virtually constant from 2011 to 2012.
D)   Both a and b are correct. B

Question 3

Table 20-12
Income Inequality in 2010 in the United States by Race
The values in the table reflect the percentages of pre-tax-and-transfer income.  Source: US Census Bureau
-Refer to Table 20-12. According to the information in the table, which race had the most income inequality in 2010?

Accepted Answer

A)   Asian
B)   Black
C)   Hispanic
D)   White B

Question 4

The marketplace allocates resources

Accepted Answer

A)   fairly.
B)   efficiently.
C)   to those desiring them least.
D)   both efficiently and equitably.

Question 5

Economic mobility refers to the

Accepted Answer

A)   government's attempt to distribute monetary assistance to areas most in need.
B)   ability of families to freely relocate to find good jobs.
C)   movement of people among income classes.
D)   movement of resources from one country to another.

Question 6

The United States has a more unequal income distribution than many other developed countries such as Japan and Germany.

Accepted Answer

A) True 
 B)False

Question 7

Scenario 20-2
The government is proposing switching from a progressive tax system, in which families pay 15% of the first $40,000 earned, 30% of the next $40,000 earned, and 45% of any income over $80,000 to a tax system in which every family pays 1/4 of its income regardless of how much they earn and all income redistribution is eliminated. That is, the tax revenue generated is used only for infrastructure, public administration, and national defense.
-Refer to Scenario 20-2. Which group would be most in favor of the proposed change in tax policy?

Accepted Answer

A)   Liberals, because they believe in the maximin criterion.
B)   Libertarians, because they do not believe in redistributing income.
C)   Utilitarians, because they believe in diminishing marginal utility.
D)   None of the above would be in favor of the proposed change.

Question 8

A goal of libertarians is to provide citizens with equal opportunities rather than to ensure equal outcomes.

Accepted Answer

A) True 
 B)False

Question 9

A typical worker's normal or average income is called

Accepted Answer

A)   the life cycle.
B)   permanent income.
C)   transitory income.
D)   in-kind transfers.

Question 10

The 2011 U.S. distribution of income shows that the top 20 percent of all families have

Accepted Answer

A)   more than twelve times the income of the bottom 20 percent.
B)   more than six times the income of the bottom 20 percent.
C)   more than 100 percent more income than the bottom 20 percent.
D)   the same share of income as the bottom 20 percent.

Question 11

Figure 20-1 Number of Poor 
-Refer to Figure 20-1. Between 1965 and 2011, during recessions (the shaded bars) the number of individuals in poverty has

Accepted Answer

A)   increased.
B)   decreased.
C)   not changed.
D)   decreased and then increased.

Question 12

The top 5 percent of U.S. annual family income in 2011 was $205,200 or more.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 20-5
Suppose the government implemented a negative income tax and used the following formula to compute a family's
tax liability:
Taxes owed = (1/4 of income) - $10,000
-Refer to Scenario 20-5. Below what level of income would families start to receive a subsidy from this negative income tax?

Accepted Answer

A)   $10,000
B)   $25,000
C)   $40,000
D)   $50,000

Question 14

The table below reflects the levels of total utility received from income for each of four members of a society.  Assume that the society has the following income distribution:
Peter $3
Paul $7 
a. Mary $5
Jane $3
Is it possible for the government to increase total aggregate utility by redistributing income among members of society? Explain your answer. Assume that the government has $19 to allocate among the four members of society.
b. (Assume that no one has any income to start with.) If the government is interested in distributing income in a way that maximizes aggregate total utility, how should it distribute the $19 of income?
c. Does the table above describe a situation characterized by diminishing marginal utility? Explain your answer.

Accepted Answer

The answer of The table below reflects the levels of...

Question 15

Table 20-10  *A Gini coefficient is a commonly used measure of income inequality, with values between 0 and 1 (0 corresponds to perfect equality whereby everyone has exactly the same income, and 1 corresponds to perfect inequality where one person has all the income, while everyone else has zero income).
Source: The World Bank
-Refer to Table 20-10. Which of the following statements is correct?

Accepted Answer

A)   Latvia has the most unequal distribution of income.
B)   France has a more equal distribution of income than Italy.
C)   Sweden has the most equal distribution of income.
D)   All of the above are correct.

Question 16

The study by economists Cox and Alm found

Accepted Answer

A)   inequality in consumption is much smaller than inequality in annual income.
B)   inequality in consumption is slightly smaller than inequality in annual income.
C)   inequality in consumption is slightly larger than inequality in annual income.
D)   inequality in consumption is much larger than inequality in annual income.

Question 17

Suppose society consists of four individuals: Andy, Bill, Carl, and David. Andy has $20,000 of income, Bill has $40,000 of income, Carl has $60,000 of income, and David has $80,000 of income. A utilitarian would argue that

Accepted Answer

A)   taking $1 from Bill and giving it to Carl would increase society's total utility.
B)   taking $1 from Carl and giving it to Andy would increase society's total utility.
C)   taking $1 from Carl and giving it to David would increase society's total utility.
D)   taking $1 from Bill and giving it to David would increase society's total utility.

Question 18

Utilitarians believe

Accepted Answer

A)   that the government should choose just policies as evaluated by an impartial observer behind a "veil of ignorance."
B)   in the assumption of diminishing marginal utility.
C)   that everyone in society should have equal utility.
D)   that the government should not redistribute income.

Question 19

Which of the following is not an example of a welfare program?

Accepted Answer

A)   Supplemental Security Income (SSI) 
B)   Temporary Assistance for Needy Families (TANF) 
C)   food stamps
D)   minimum wage laws

Question 20

Scenario 20-1
The government is proposing switching from a progressive tax system in which families pay 15% of the first $50,000 earned, 25% of the next $50,000 earned, and 35% of any income over $100,000 to a tax system in which every family pays 20% of their income less $20,000.
-Refer to Scenario 20-1. What would the libertarians think of the proposed policy change?

Accepted Answer

A)   They would favor the current progressive policy over the proposed policy because it accounts for diminishing marginal utility.
B)   They would favor the proposed tax policy over the current progressive policy because it would result in a negative tax for the poorest families.
C)   They would favor the current progressive tax policy over the proposed policy because it rewards those who work the hardest.
D)   They would oppose both tax policies because both redistribute income.

Exam 20: Income Inequality and Poverty

Critics of the minimum wage argue that

Table 20-6 -Refer to Table 20-6. A person who is concerned that income inequality has worsened between 2011 and 2012 would cite which of the following statistics to support her position?

Table 20-12 Income Inequality in 2010 in the United States by Race The values in the table reflect the percentages of pre-tax-and-transfer income. Source: US Census Bureau -Refer to Table 20-12. According to the information in the table, which race had the most income inequality in 2010?

The marketplace allocates resources

Economic mobility refers to the

The United States has a more unequal income distribution than many other developed countries such as Japan and Germany.

A goal of libertarians is to provide citizens with equal opportunities rather than to ensure equal outcomes.

A typical worker's normal or average income is called

The 2011 U.S. distribution of income shows that the top 20 percent of all families have

Figure 20-1 Number of Poor -Refer to Figure 20-1. Between 1965 and 2011, during recessions (the shaded bars) the number of individuals in poverty has

The top 5 percent of U.S. annual family income in 2011 was $205,200 or more.

The study by economists Cox and Alm found

Suppose society consists of four individuals: Andy, Bill, Carl, and David. Andy has $20,000 of income, Bill has $40,000 of income, Carl has $60,000 of income, and David has $80,000 of income. A utilitarian would argue that

Utilitarians believe

Which of the following is not an example of a welfare program?