Question 1

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

Question 2

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

Life-cycle variation in income suggests that people's spending patterns vary less over their lifetimes than their income patterns.Young people may borrow so that they can spend more than they earn.An example of this would be a young person borrowing to go to college,buy a car,or buy a house.Annual earnings peak around age 50.Not surprisingly,many people save more in middle-age than at other times in their life.Their savings allow them to pay off the debts incurred when they were younger and to put away money that they will use to supplement their incomes once they retire.The permanent income hypothesis tries to account for random and transitory forces that affect income.People may borrow when they experience a temporary reduction in income and may save unexpected increases in income (e.g.a holiday bonus from an employer).The two theories are not mutually exclusive.Both theories would indicate that standard measures of income distribution overstate inequality in the distribution of well-being.

Question 3

The poverty line is adjusted each year to reflect changes in the

Accepted Answer

A)  number of people currently on public assistance. 
B)  level of prices. 
C)  nutritional content of an "adequate" diet. 
D)  size of a family. 
A)  number of people currently on public assistance. 
B)  level of prices. 
C)  nutritional content of an "adequate" diet. 
D)  size of a family. B

Question 4

A tax provision that works much like a negative income tax is the

Accepted Answer

A)  Earned Income Tax Credit (EIT
C) . 
B)  Temporary Assistance for Needy Families (TANF). 
C)  deduction for charitable contributions. 
D)  mortgage interest rate deduction. 
A)  Earned Income Tax Credit (EIT
C) . 
B)  Temporary Assistance for Needy Families (TANF). 
C)  deduction for charitable contributions. 
D)  mortgage interest rate deduction.

Question 5

Table 20-8
   
Source: U.S. Bureau of Census
-Refer to Table 20-8.Comparing data from 2000 and 2008,which of the following statements is correct?

Accepted Answer

A)  There has been no change in overall income inequality because the share of income held by the middle fifth is identical. 
B)  Overall income inequality has worsened slightly, as shown by the simultaneous increase the share of income held by the top fifth and the decrease in the share of income held by the bottom fifth. 
C)  Overall income inequality has improved because the share held by the middle fifth has declined by almost 1%. 
D)  None of the above is correct. 
A)  There has been no change in overall income inequality because the share of income held by the middle fifth is identical. 
B)  Overall income inequality has worsened slightly, as shown by the simultaneous increase the share of income held by the top fifth and the decrease in the share of income held by the bottom fifth. 
C)  Overall income inequality has improved because the share held by the middle fifth has declined by almost 1%. 
D)  None of the above is correct.

Question 6

Assume that the government proposes a negative income tax that calculates taxes owed by the following formula,
Taxes Owed = (1/3   Income)- $10,000.
Compute the tax that would be owed given each level of income.
a.$120,000
b.$90,000
c.$60,000
d.$30,000
e.$0

Accepted Answer

a.$30,000
b.$20,000
c.$10,000

Question 7

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. 
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.

Question 8

The calculation of the poverty line includes adjustments for

Accepted Answer

A)  energy costs. 
B)  child care costs. 
C)  the level of prices. 
D)  the Earned Income Tax Credit. 
A)  energy costs. 
B)  child care costs. 
C)  the level of prices. 
D)  the Earned Income Tax Credit.

Question 9

In 2008 the top 5 percent of income earners accounted for over 50% of all income received by United States' families.

Accepted Answer

A) True 
 B)False

Question 10

For which of the following programs can a person qualify solely by having a low income?

Accepted Answer

A)  both Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) 
B)  Temporary Assistance for Needy Families (TANF) but not Supplemental Security Income (SSI) 
C)  Supplemental Security Income (SSI) but not Temporary Assistance for Needy Families (TANF) 
D)  neither Temporary Assistance for Needy Families (TANF) nor Supplemental Security Income (SSI) 
A)  both Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) 
B)  Temporary Assistance for Needy Families (TANF) but not Supplemental Security Income (SSI) 
C)  Supplemental Security Income (SSI) but not Temporary Assistance for Needy Families (TANF) 
D)  neither Temporary Assistance for Needy Families (TANF) nor Supplemental Security Income (SSI)

Question 11

The study by economists Cox and Alm found that the 2006 after-tax income of the richest fifth of U.S.households is

Accepted Answer

A)  equal to the after-tax income of the poorest fifth. 
B)  7 times the after-tax income of the poorest fifth. 
C)  14 times the after-tax income of the poorest fifth. 
D)  21 times the after-tax income of the poorest fifth. 
A)  equal to the after-tax income of the poorest fifth. 
B)  7 times the after-tax income of the poorest fifth. 
C)  14 times the after-tax income of the poorest fifth. 
D)  21 times the after-tax income of the poorest fifth.

Question 12

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. 
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 13

Figure 20-4
Poverty Rates by Age
  
-Refer to Figure 20-4.In 2001,the percent of elderly aged 65 and over in poverty is

Accepted Answer

A)  higher than both the percentage of adults aged 18 to 64 and the percentage of children under age 18 in poverty. 
B)  higher than the percentage of adults aged 18 to 64 but is lower than the percentage of children under age 18 in poverty. 
C)  lower than both the percentage of adults aged 18 to 64 and the percentage of children under age 18 in poverty. 
D)  lower than the percentage of children under age 18 but is equal to the percentage of adults aged 18 to 64 in poverty. 
A)  higher than both the percentage of adults aged 18 to 64 and the percentage of children under age 18 in poverty. 
B)  higher than the percentage of adults aged 18 to 64 but is lower than the percentage of children under age 18 in poverty. 
C)  lower than both the percentage of adults aged 18 to 64 and the percentage of children under age 18 in poverty. 
D)  lower than the percentage of children under age 18 but is equal to the percentage of adults aged 18 to 64 in poverty.

Question 14

A society consists of three individuals: Arthur,Billie,and Chris.In terms of income and utility,Arthur is currently best-off,Billie ranks in the middle,and Chris is worst-off.Which of the following statements is correct?

Accepted Answer

A)  Utilitarianism suggests that government policies should strive to maximize Billie's utility. 
B)  Liberalism suggests that government policies should strive to increase Chris's utility. 
C)  Libertarianism suggests that government policies should strive to maximize Arthur's utility. 
D)  Mobilism suggests that government policies should strive to make Chris better off than Billie. 
A)  Utilitarianism suggests that government policies should strive to maximize Billie's utility. 
B)  Liberalism suggests that government policies should strive to increase Chris's utility. 
C)  Libertarianism suggests that government policies should strive to maximize Arthur's utility. 
D)  Mobilism suggests that government policies should strive to make Chris better off than Billie.

Question 15

The concept of utility is fundamental to utilitarianism and describes the

Accepted Answer

A)  optimal distribution of wealth in society. 
B)  level of satisfaction derived from a person's circumstances. 
C)  method by which society chooses to allocate resources. 
D)  method whereby wealth is stored. 
A)  optimal distribution of wealth in society. 
B)  level of satisfaction derived from a person's circumstances. 
C)  method by which society chooses to allocate resources. 
D)  method whereby wealth is stored.

Question 16

The political philosophy that views the redistribution of income as a form of social insurance is

Accepted Answer

A)  utilitarianism 
B)  liberalism 
C)  libertarianism 
D)  welfarism 
A)  utilitarianism 
B)  liberalism 
C)  libertarianism 
D)  welfarism

Question 17

Whether or not policymakers should try to make our society more egalitarian is largely a matter of

Accepted Answer

A)  economic efficiency. 
B)  political philosophy. 
C)  egalitarian principles. 
D)  enhanced opportunity. 
A)  economic efficiency. 
B)  political philosophy. 
C)  egalitarian principles. 
D)  enhanced opportunity.

Question 18

Suppose that Jake and Abby each win $1,000 in a state lottery.Jake spends his winnings on a new television.Abby saves her winnings for a "rainy day." Which of the following is correct?

Accepted Answer

A)  Both Jake's and Abby's behavior suggest that they base their purchasing decisions on transitory income. 
B)  Jake's behavior suggests that he bases his purchasing decisions on transitory income rather than permanent income. Abby's behavior suggest that she bases her purchasing decisions on permanent income rather than transitory income. 
C)  Jake's behavior suggests that he bases his purchasing decisions on permanent income rather than transitory income. Abby's behavior suggests that she bases her purchasing decisions on transitory income rather than permanent income. 
D)  Both Jake's and Abby's behavior suggest that they base their purchasing decisions on permanent income. 
A)  Both Jake's and Abby's behavior suggest that they base their purchasing decisions on transitory income. 
B)  Jake's behavior suggests that he bases his purchasing decisions on transitory income rather than permanent income. Abby's behavior suggest that she bases her purchasing decisions on permanent income rather than transitory income. 
C)  Jake's behavior suggests that he bases his purchasing decisions on permanent income rather than transitory income. Abby's behavior suggests that she bases her purchasing decisions on transitory income rather than permanent income. 
D)  Both Jake's and Abby's behavior suggest that they base their purchasing decisions on permanent income.

Question 19

Saving and borrowing is indicative of a family that

Accepted Answer

A)  is most likely to be poor. 
B)  has a difficult time balancing its standard of living. 
C)  does not adjust its standard of living to reflect transitory changes in income. 
D)  is most likely millionaires. 
A)  is most likely to be poor. 
B)  has a difficult time balancing its standard of living. 
C)  does not adjust its standard of living to reflect transitory changes in income. 
D)  is most likely millionaires.

Question 20

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

Exam 20: Income Inequality and Poverty.

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

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

The poverty line is adjusted each year to reflect changes in the

A tax provision that works much like a negative income tax is the

Table 20-8 Source: U.S. Bureau of Census -Refer to Table 20-8.Comparing data from 2000 and 2008,which of the following statements is correct?

Assume that the government proposes a negative income tax that calculates taxes owed by the following formula, Taxes Owed = (1/3 Income)- $10,000. Compute the tax that would be owed given each level of income. a.$120,000 b.$90,000 c.$60,000 d.$30,000 e.$0

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

The calculation of the poverty line includes adjustments for

In 2008 the top 5 percent of income earners accounted for over 50% of all income received by United States' families.

For which of the following programs can a person qualify solely by having a low income?

The study by economists Cox and Alm found that the 2006 after-tax income of the richest fifth of U.S.households is

Utilitarians believe

Figure 20-4 Poverty Rates by Age -Refer to Figure 20-4.In 2001,the percent of elderly aged 65 and over in poverty is

A society consists of three individuals: Arthur,Billie,and Chris.In terms of income and utility,Arthur is currently best-off,Billie ranks in the middle,and Chris is worst-off.Which of the following statements is correct?

The concept of utility is fundamental to utilitarianism and describes the

The political philosophy that views the redistribution of income as a form of social insurance is

Whether or not policymakers should try to make our society more egalitarian is largely a matter of

Suppose that Jake and Abby each win $1,000 in a state lottery.Jake spends his winnings on a new television.Abby saves her winnings for a "rainy day." Which of the following is correct?

Saving and borrowing is indicative of a family that

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.

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopoly.

Monopolistic Competition.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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