Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The income distribution in the United States shows that the income share of the top fifth of all families is

Accepted Answer

A)   over 60 percent.
B)   around 21 percent.
C)   more than 12 times the income of the bottom fifth.
D)   less than 10 times the income of the bottom fifth.E) B) and D)
F) B) and C)

Question 3

A utilitarian government will pursue policies that redistribute income from the rich to the poor. One problem with these policies is that

Accepted Answer

A)   everyone has less incentive to work hard.
B)   the rich will work harder while the poor will not.
C)   the poor will work harder while the rich will not.
D)   everyone in the middle class ends up worse off.E) A) and B)
F) A) and C)

Question 4

In the United States from 1935 to 2011 the share of total income earned by the bottom fifth of income earners rose and then fell.

Accepted Answer

A) True 
 B)False

Question 5

Based on U.S. income data from 2011, the bottom fifth of all families received approximately what percent of all income?

Accepted Answer

A)   48.9 percent
B)   21.3 percent
C)   8.6 percent
D)   3.8 percentE) A) and D)
F) C) and D)

Question 6

Economists who study economic mobility have found that, if a father earns 20 percent above his generation's average income, his son will most likely earn

Accepted Answer

A)   an income equal to his generation's average income.
B)   8 percent above his generation's average income.
C)   5 percent below his generation's average income.
D)   3 percent above his generation's average income.E) None of the above
F) A) and D)

Question 7

Table 20-1
The following table shows the distribution of income in Marysville.
 
-Refer to Table 20-1. Seventy-five percent of all families have incomes below what level?

Accepted Answer

A)   $30,000
B)   $60,000
C)   $90,000
D)   There is insufficient information to answer this question.E) A) and B)
F) A) and C)

Question 8

When we compare the income distribution of the United States to those of other countries, we find that the U.S. has

Accepted Answer

A)   an income distribution similar to Japan's.
B)   an income distribution similar to South Africa's.
C)   one of the most unequal income distributions.
D)   a bit more inequality than the typical country.E) None of the above
F) A) and B)

Question 9

Which of the following statements is not correct?

Accepted Answer

A)   An advantage of the Earned Income Tax Credit (EIT
C)   is that it targets the working poor better than the minimum wage because it does not benefit teenagers from middle-class families who work summer jobs at the minimum wage.
B)   A disadvantage of in-kind transfer programs such as food stamps is that they force recipients to purchase from a restricted set of items which may not include things that the poor need the most such as diapers or cleaning supplies.
C)   A disadvantage of minimum wage laws is that they are expensive for state and local governments to fund.
D)   Effective minimum wage laws create a surplus of labor.E) A) and C)
F) None of the above

Question 10

If greater equality is the benefit of government intervention into the allocation of society's resources, what is the cost?

Accepted Answer

The answer of If greater equality is the benefit of...

Question 11

Which of the following is an example of a welfare program?

Accepted Answer

A)   Temporary Assistance for Needy Families (TANF) .
B)   Capital Gains Tax (CGT) .
C)   Life Cycle Transfers (LCT) .
D)   North American Free Trade Agreement (NAFT
A)  .E) A) and C)
F) None of the above

Question 12

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

Accepted Answer

A)   an income distribution that is relatively equal.
B)   that everyone has the same work opportunities and market-determined wage rates.
C)   that private property be transformed to government property to safeguard people's incomes.
D)   less economic assistance to the poor because it distorts the price system.E) All of the above
F) None of the above

Question 13

Economists who support minimum-wage legislation are likely to believe that the

Accepted Answer

A)   demand for unskilled labor is relatively inelastic.
B)   demand for unskilled labor is relatively elastic.
C)   supply of unskilled labor is relatively elastic.
D)   supply of unskilled labor is relatively inelastid.E) B) and C)
F) A) and C)

Question 14

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.E) C) and D)
F) B) and D)

Question 15

A utilitarian government must

Accepted Answer

A)   calculate the utility of each individual in society.
B)   avoid enacting any policies that redistribute income from the rich to the poor.
C)   balance the gains from greater equality against the losses from distorted incentives.
D)   pursue policies that do not affect the middle class.E) A) and B)
F) All of the above

Question 16

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis. What are their respective implications for inequality in the income distribution?

Accepted Answer

Life­cycle variation in income suggests ...

Question 17

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. A family earning $110,000 before taxes would have how much after-tax income?

Accepted Answer

A)   $82,500
B)   $92,500
C)   $100,000
D)   $127,500E) A) and C)
F) All of the above

Question 18

In the U.S. economy, labor earnings make up about

Accepted Answer

A)   one-half of total income.
B)   two-thirds of total income.
C)   three-fourths of total income.
D)   nine-tenths of total income.E) B) and C)
F) A) and B)

Question 19

According to a study by Michael Cox and Richard Alm, consumption per person in the richest 20% of households was only 2.1 times consumption per person in the poorest 20% of households.

Accepted Answer

A) True 
 B)False

Question 20

Robert Nozick criticizes Rawls's concept of justice by using an example of

Accepted Answer

A)   minimum wage laws.
B)   the grade distribution in a class.
C)   a leaky bucket.
D)   the price of tea in China.E) A) and B)
F) A) and C)

Exam 20: Income Inequality and Poverty

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

Correct Answer
verified

A utilitarian government must

Correct Answer
verified

Economists who study economic mobility have found that, if a father earns 20 percent above his generation's average income, his son will most likely earn

Correct Answer
verified

The income distribution in the United States shows that the income share of the top fifth of all families is

Correct Answer
verified

Table 20-1 The following table shows the distribution of income in Marysville. -Refer to Table 20-1. Seventy-five percent of all families have incomes below what level?

Correct Answer
verified

When we compare the income distribution of the United States to those of other countries, we find that the U.S. has

Correct Answer
verified

Correct Answer
verified

A utilitarian government will pursue policies that redistribute income from the rich to the poor. One problem with these policies is that

Correct Answer
verified

Which of the following is an example of a welfare program?

Correct Answer
verified

If greater equality is the benefit of government intervention into the allocation of society's resources, what is the cost?

Correct Answer
verified

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. A family earning $110,000 before taxes would have how much after-tax income?

Correct Answer
verified

According to a study by Michael Cox and Richard Alm, consumption per person in the richest 20% of households was only 2.1 times consumption per person in the poorest 20% of households.

Correct Answer
verified

In the U.S. economy, labor earnings make up about

Correct Answer
verified

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis. What are their respective implications for inequality in the income distribution?

Correct Answer
verified
Lifecycle variation in income suggests ...
View Answer

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

Correct Answer
verified

In the United States from 1935 to 2011 the share of total income earned by the bottom fifth of income earners rose and then fell.

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

Based on U.S. income data from 2011, the bottom fifth of all families received approximately what percent of all income?

Correct Answer
verified

Robert Nozick criticizes Rawls's concept of justice by using an example of

Correct Answer
verified

Economists who support minimum-wage legislation are likely to believe that the

Correct Answer
verified

Exam 20: Income Inequality and Poverty

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

Correct AnswerverifiedShow Answer

A utilitarian government must

Correct AnswerverifiedShow Answer

Economists who study economic mobility have found that, if a father earns 20 percent above his generation's average income, his son will most likely earn

Correct AnswerverifiedShow Answer

The income distribution in the United States shows that the income share of the top fifth of all families is

Correct AnswerverifiedShow Answer

Table 20-1 The following table shows the distribution of income in Marysville. -Refer to Table 20-1. Seventy-five percent of all families have incomes below what level?

Correct AnswerverifiedShow Answer

When we compare the income distribution of the United States to those of other countries, we find that the U.S. has

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A utilitarian government will pursue policies that redistribute income from the rich to the poor. One problem with these policies is that

Correct AnswerverifiedShow Answer

Which of the following is an example of a welfare program?

Correct AnswerverifiedShow Answer

If greater equality is the benefit of government intervention into the allocation of society's resources, what is the cost?

Correct AnswerverifiedShow Answer

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. A family earning $110,000 before taxes would have how much after-tax income?

Correct AnswerverifiedShow Answer

According to a study by Michael Cox and Richard Alm, consumption per person in the richest 20% of households was only 2.1 times consumption per person in the poorest 20% of households.

Correct AnswerverifiedShow Answer

In the U.S. economy, labor earnings make up about

Correct AnswerverifiedShow Answer

Compare and contrast the "life cycle" hypothesis and the "permanent income" hypothesis. What are their respective implications for inequality in the income distribution?

Correct AnswerverifiedLife­cycle variation in income suggests ...View AnswerShow Answer

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

Correct AnswerverifiedShow Answer

In the United States from 1935 to 2011 the share of total income earned by the bottom fifth of income earners rose and then fell.

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Based on U.S. income data from 2011, the bottom fifth of all families received approximately what percent of all income?

Correct AnswerverifiedShow Answer

Robert Nozick criticizes Rawls's concept of justice by using an example of

Correct AnswerverifiedShow Answer

Economists who support minimum-wage legislation are likely to believe that the

Correct AnswerverifiedShow Answer

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Lifecycle variation in income suggests ...
View Answer

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