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Exam 20: Income Inequality and Poverty

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Question 1

Multiple Choice

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The marketplace allocates resources

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

E) A) and B)
F) A) and C)

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Question 2

Multiple Choice

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Critics of the minimum wage argue that

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.

E) B) and C)
F) A) and D)

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C

Question 3

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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?

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

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

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

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?

A typical worker's normal or average income is called

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

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.

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

Economic mobility refers to the

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?

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?

The study by economists Cox and Alm found

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?

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?

Utilitarians believe

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

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