Deck 15: Income,inequality,and Poverty

Question 1

The popular TV shows Ice Road Truckers and Ax Men portray workers engaged in dangerous jobs such as driving big trucks over ice and cutting down big trees.You would expect that these workers would earn a

A) low salary because of tax credits for the poor.
B) high salary because they are in desirable geographic locations.
C) high salary because they have dangerous jobs.
D) low salary because they have union jobs.
E) low salary because they have dangerous jobs.

Answer 1

high salary because they have dangerous jobs.

Question 2

Using a compensating differential wage theory,some individuals earn more than others because workers

A) who earn more are more productive.
B) need to earn more to be willing to accept dangerous working conditions.
C) need to earn more to be willing to accept a safe indoor job.
D) who are more educated and better trained are able to earn more than the equilibrium wage.
E) who earn more tend to be concentrated in a single occupation.

Answer 2

need to earn more to be willing to accept dangerous working conditions.

Question 3

Tiffany is a physician in New York City,her favorite city in the world.What would be some of the nonmonetary determinants of her wages?

A) Her wages are higher because of her education and the desirability of her location.
B) Her wages are lower because of her education and the desirability of her location.
C) Her wages are higher because of her education,but they are reduced because of the desirability of her location.
D) Her wages are higher because of the desirability of her location,but they are slightly reduced because of her education.
E) Her wages are lower because her employer pays her an efficiency wage.

Answer 3

Her wages are higher because of her education,but they are reduced because of the desirability of her location.

Question 4

Coal mining is a dangerous occupation.For such a job,the passage of workplace safety laws would

A) at first increase but then decrease the severity of the negative compensating differential.
B) increase the severity of the negative compensating differentials.
C) decrease the severity of the negative compensating differentials.
D) at first decrease but then increase the severity of the negative compensating differentials.
E) have no effect on the compensating differentials.

Question 5

Mitchell has a cause: He loves cats.As an economist,he could earn $100,000 as a faculty member,but instead he decides to devote his time to the Humane Society as its chief economist.Knowing nothing else,you would expect that he would receive

A) higher pay at the Humane Society because of the difference in skill levels.
B) lower pay at the Humane Society because of signal theory.
C) lower pay at the Humane Society because of the compensating differential theory.
D) higher pay at the Humane Society because of signal theory.
E) the same pay as either a professor or as a chief economist at the Humane Society.

Question 6

When comparing individuals' wages,differences in their levels of education and training

A) can completely explain the existence of income inequality.
B) can completely explain why some individuals are more productive than others.
C) have no bearing on why some individuals are drawn to certain occupations.
D) can partially explain why some individuals earn higher wages than others.
E) have no bearing on income mobility.

Question 7

If Alexia is more educated and better trained than Felix,economists would use the ________ model to predict that Alexia should earn the higher wage.

A) occupational crowding
B) winner-take-all
C) income mobility
D) human capital
E) compensating differential

Question 8

As a college student,Bethany realizes that she has become an expert at playing video games.If Bethany saw a commercial on TV seeking applications for video game testers (her dream job),she would expect the job to pay

A) low wages because of the efficiency wage principle.
B) low wages because of occupational crowding.
C) high wages because of compensating differentials.
D) low wages because of compensating differentials.
E) high wages because of the in-kind transfers.

Question 9

Some employers are willing to provide job training for workers.The employer might be willing to pay for the training when

A) the training is specific to the employer.
B) the training is a general skill that could be used at any job for any employer.
C) the training is of short length.
D) the training is extensive.
E) on its completion,the student receives a degree.

Question 10

Some employers are willing to provide job training for workers.However,an employer might require the worker to pay for the training when the training is

A) specific to the employer.
B) a general skill that could be used in any job for any employer.
C) of short length.
D) extensive.
E) provided by a manager in the firm.

Question 11

What theory might partially explain why a person perceived as unattractive might earn less than a person seen as attractive?

A) winner-take-all
B) compensating differential
C) samaritan's dilemma
D) occupational crowding
E) efficiency wage

Question 12

What theory would lead someone to be suspicious of a job advertisement that reads: "Help Wanted! Fun and exciting job with excellent pay"?

A) human capital
B) life-cycle wage pattern
C) winner-take-all
D) compensating differentials
E) efficiency wage theory

Question 13

As the mayor of a local town,Wang has the power to repeal workplace safety laws.For construction workers building the local school,the repeal of all workplace safety laws would

A) reduce their wages because of less severe positive compensating differentials.
B) increase their wages because of less severe positive compensating differentials.
C) reduce their wages because of more severe positive compensating differentials.
D) increase their wages because of more severe positive compensating differentials.
E) result in no effect on their wages because of offsetting differentials.

Question 14

Someone might expect a job as a college professor to pay a wage lower than the wage one could receive in the private sector because of

A) negative compensating differentials.
B) positive compensating differentials.
C) efficiency wages.
D) the life-cycle wage pattern.
E) in-kind transfers.

Question 15

An employee gains work experience by staying in a job for a long period of time.An economist would expect this employee's wages to

A) increase as experience is gained.
B) decrease as experience is gained.
C) increase,but then decrease over time as experience is gained.
D) decrease,but then increase over time as experience is gained.
E) stay the same since experience would have no effect on wages.

Question 16

What theory would justify a job advertisement that reads: "Help Wanted! Dangerous job but excellent pay and benefits"?

A) human capital
B) life-cycle wage pattern
C) compensating differentials
D) winner-take-all
E) efficiency wage

Question 17

What theory would suggest that learning material on your own generates the same benefits as those achieved by formally attending classes and receiving a degree?

A) human capital
B) signal
C) compensating differentials
D) winner-take-all
E) efficiency wage

Question 18

As the mayor of a local town,Newman has the power to repeal workplace safety laws.How would repealing all workplace safety laws affect the wages of kindergarten teachers who work in relatively safe jobs at the local school?

A) It would reduce teachers' wages because of less-severe negative compensating differentials.
B) It would increase teachers' wages because of less-severe negative compensating differentials.
C) It would reduce teachers' wages because of more-severe negative compensating differentials.
D) It would increase teachers' wages because of more-severe negative compensating differentials.
E) It would have little effect on teachers' wages because of a lack of negative compensating differentials.

Question 19

Jasmine,a woman,is more educated and better trained than Christian,a male.Despite these differences in education and training,Christian still earns more because he is a coal miner,whereas Jasmine is a secretary.Which model best explains the fact that Christian earns more than Jasmine?

A) efficiency wage
B) winner-take-all
C) income mobility
D) human capital
E) compensating differentials

Question 20

Late-night employees working in a 24-hour store often earn more than similar employees who work the day shift.What explains this difference in pay?

A) life-cycle wage pattern
B) human capital theory
C) occupational crowding
D) negative compensating differential
E) positive compensating differential

Question 21

Christine's mother told her that she needed to go to college because it would be the only way she could get a high-paying job.What economic theory would justify her advice?

A) efficiency wage
B) compensating differential
C) life-cycle wage pattern
D) human capital
E) occupational crowding

Question 22

As an Internet retailer,Luciana needs to find a location for her headquarters.If Luciana is primarily concerned with the cost of labor and wants to pay those she hires as little as possible,Luciana should establish her business in a(n)

A) location with a lot of good restaurants.
B) cold location in a rural area.
C) urban location that has a lot of crime.
D) rural location that has frequent wildfires and floods.
E) urban location with a lot of earthquakes.

Question 23

As an employee at a convenience store,Jorge is content to stay with his employer because his wage is 50 percent higher than the market rate.What economic theory could justify his employer's willingness to pay above the market rate?

A) samaritan's dilemma
B) winner-take-all
C) human capital
D) compensating differential
E) efficiency wage

Question 24

What theory would justify a job advertisement that reads: "Help Wanted! Looking for a person willing to stay with the firm for a long time.Excellent pay"?

A) human capital
B) life-cycle wage pattern
C) compensating differentials
D) winner-take-all
E) efficiency wage

Question 25

If Hanna were the chief economics planner in Mitchell,South Dakota,a rural location that boasts the world's largest corn palace,what would be her biggest challenge in encouraging economic development in terms of location?

A) If the location is deemed undesirable by employees,employers will have to pay lower wages.
B) If the location is deemed undesirable by employees,employers will have to pay higher wages.
C) If the location has a low cost of living,employers will have to pay higher wages.
D) If the location has a high cost of living,employers will have to pay lower wages.
E) Its location should have no effect on wages.

Question 26

When workers of the same ability are not paid the same amount because of a group characteristic such as ethnic origin or age,we call this

A) efficiency wage theory.
B) wage discrimination.
C) compensating differential theory.
D) winner-take-all theory.
E) occupational crowding.

Question 27

As an employer,Giselle wants productive employees who will stay with the firm for an extended period of time,so she should pay

A) less because human capital theory suggests better-paid employees work harder and stay longer.
B) less because of the existence of compensating differentials.
C) more because human capital theory suggests better-paid employees work harder and stay longer.
D) more because of the existence of compensating differentials.
E) more because efficiency wage theory suggests that the employer will be able to secure more productive employees.

Question 28

Besides sex discrimination,women might earn less than men in the workplace because women

A) have more human capital.
B) have fewer years of work experience.
C) have more years of work experience.
D) work more hours per year.
E) more frequently belong to a union.

Question 29

Someone might expect a fast-food job to pay a wage higher than the minimum wage because it

A) is boring and an efficiency wage is offered to reduce turnover.
B) is safe.
C) doesn't require a lot of education.
D) is not unionized.
E) is exciting and fast-paced.

Question 30

Using an efficiency wage theory,why do some individuals earn more than the market equilibrium wage?

A) Workers who earn more are those who are more productive.
B) Workers need to earn more to be willing to accept dangerous working conditions.
C) Workers need to earn more to be willing to accept a safe indoor job.
D) Workers who are more educated and better trained are able to earn more than the equilibrium wage.
E) Workers who earn more tend to be concentrated in a single occupation.

Question 31

As the owner of a television studio,Kelvin is concerned about the high wages he must pay his employees relative to wages paid by other television studio owners.A consultant has suggested that his location is a contributing factor to these higher wages because he has built his studio in a(n)

A) sunny location in an urban area with a lot of good restaurants.
B) rural location populated by friendly people.
C) urban location that has very little crime and good schools.
D) location that has frequent wildfires and floods.
E) urban location populated by friendly people.

Question 32

Between two unionized firms,one would expect workers to receive higher wages in a firm

A) where the threat of a strike is low.
B) where the threat of a strike is high.
C) that can substitute labor with capital easily.
D) that can relocate the production process easily.
E) that has workers with low education levels.

Question 33

What theory suggests that learning material on your own would not generate the same benefits as those achieved by formally attending classes and receiving a degree?

A) human capital
B) signal
C) compensating differentials
D) winner-take-all
E) efficiency wage

Question 34

The cost of education at an Ivy League university is more than $50,000 per year.At a community college,the cost of education is only a few thousand dollars per year.What economic theory could justify enrolling in an Ivy League school?

A) compensating differentials
B) income mobility
C) life-cycle wage pattern
D) signal
E) human capital

Question 35

One frequently sees a strong relationship between median annual earnings and education level.What theory would suggest that education provides valuable skills?

A) compensating differentials
B) income mobility
C) life-cycle wage pattern
D) signal
E) human capital

Question 36

What is a significant difference between a union job and a nonunion job in terms of pay?

A) Union jobs pay less than nonunion jobs because of efficiency wage theory.
B) Nonunion jobs pay more than union jobs because of the winner-take-all theory.
C) Union jobs pay more than nonunion jobs because of occupational crowding.
D) Union jobs pay more than nonunion jobs because of the threat of a strike.
E) Nonunion jobs pay more than union jobs because of binding arbitration.

Question 37

When comparing a union job to a nonunion job,we would expect to see

A) higher wages being paid to the employee holding a nonunion job.
B) lower wages being paid to the employee holding a union job.
C) better pay and benefits being received by the employee holding a nonunion job.
D) no difference in the pay and benefits received by the employees in the union and nonunion jobs.
E) higher wages being paid for the employee holding a union job.

Question 38

A white male from the Midwest earns $50,000 a year and a white female earns $40,000 a year.What can we conclude about this situation?

A) There is no discrimination present.
B) The white female is being discriminated against by $10,000.
C) The white female is being discriminated against,but the amount is less than $10,000.
D) The white female is being discriminated against,but the dollar amount is unclear.
E) There is not enough information to know whether discrimination exists.

Question 39

What theory would suggest that an employee should receive a wage higher than the equilibrium wage rate?

A) efficiency wage
B) in-kind transfers
C) occupational crowding
D) samaritan's dilemma
E) binding arbitration

Question 40

In recent decades,more women than men have received undergraduate degrees.Consequently,women's wages will ________ according to ________ theory.

A) decrease; compensating differential
B) increase; compensating differential
C) decrease; human capital
D) increase; human capital
E) decrease; efficiency wage

Question 41

What role does corruption play in creating income inequality?

A) It discourages mobility.
B) It encourages human capital investments.
C) It discourages winner-take-all situations.
D) It discourages business investment.
E) It discourages discrimination.

Question 42

What is the name of the model that best explains why an actor in a nationally broadcast television program earns so much more than an actor who is equally talented and productive but who performs in a local play?

A) occupational crowding
B) winner-take-all
C) income mobility
D) human capital
E) life-cycle wage pattern

Question 43

What theory can partially explain why pink-collar jobs,such as nurse and dental hygienist,earn so little despite the important services they provide?

A) winner-take-all
B) compensating differential
C) samaritan's dilemma
D) occupational crowding
E) efficiency wage theory

Question 44

Approximately ________ percent of the total national income is owned by the poorest 40 percent (bottom two quintiles)of households in the United States.

A) 3
B) 7
C) 12
D) 20
E) 40

Question 45

Felicia has an idea to provide a grocery home-delivery service in the developing country of Mongolia.What role would corruption play in the success of her business?

A) It would make the market more competitive.
B) It would encourage her to work harder.
C) It would encourage her to invest in her business.
D) It would discourage her about investing in her business.
E) It would have no effect on the success of her business.

Question 46

Why is it unlikely that income inequality could ever be eliminated?

A) Workers will always have the same skills,abilities,and productivities.
B) All jobs are roughly equal in their attractiveness to workers.
C) All workers are perfectly mobile.
D) Workers will always have different skills,abilities,and productivities.
E) Workers all share the goal of earning as much income as possible.

Question 47

What theory can explain why a CEO might earn so much more than other managers with similar experience and education at the same company?

A) efficiency wage
B) winner-take-all
C) human capital
D) samaritan's dilemma
E) binding arbitration

Question 48

The occupational crowding model of discrimination predicts

A) why men,in some cases,earn less than women.
B) that firms will compete with one another for the best employee and that discrimination will be eliminated.
C) that,unless the government gets involved,discrimination will become more severe.
D) that men's wages will fall and women's wages will rise when certain jobs are no longer dominated by men.
E) the financial advantages for women crowding into a single occupation.

Question 49

What is the approximate inequality ratio (richest 20 percent ÷ poorest 20 percent)in the United States?

A) 4.1
B) 15.5
C) 24.3
D) 75.1
E) 98.2

Question 50

Besides overt sex discrimination,women also might earn less than men in the workplace because women

A) have more human capital.
B) tend to congregate in a narrow range of jobs that pay very little.
C) have more years of work experience.
D) work more hours per year.
E) tend to receive an efficiency wage.

Question 51

How can a stronger legal system reduce income inequality?

A) It encourages investment by removing corruption.
B) It encourages the payment of efficiency wages.
C) It encourages occupational crowding.
D) It encourages winner-take-all situations.
E) It discourages investments in human capital.

Question 52

The pay for journalists is quite varied.A top-tier journalist often receives a steady flow of assignments,such as two weekly columns,and so earns generous pay.A lower-tier journalist,however,often experiences sporadic work assignments with little to no pay.What economic theory explains this situation?

A) winner-take-all
B) in-kind transfers
C) efficiency wage
D) occupational crowding
E) compensating differentials

Question 53

The wages of those near retirement decrease slightly because these workers are

A) gaining additional skills.
B) becoming more productive.
C) becoming more efficient.
D) being discriminated against.
E) gaining additional experience but are not keeping up with new technologies.

Question 54

If Ty's daughter were to inform him that she wanted to be a bank teller and he were concerned about her ability to pay her bills,what economic theory could Ty use to convince his daughter to become an engineer instead?

A) compensating differential
B) life-cycle wage pattern
C) winner-take-all
D) occupational crowding
E) efficiency wage

Question 55

As a male nurse,Gregory often complains about the low pay he receives despite the fact that he has a significant amount of education.What economic theory explains his suppressed wage?

A) compensating differential
B) human capital
C) winner-take-all
D) occupational crowding
E) efficiency wage

Question 56

If households in the lowest income-earning bracket are doing relatively well compared to those in the highest income-earning bracket,the inequality ratio will

A) fall.
B) initially grow,but then fall.
C) grow.
D) initially fall,but then grow.
E) be unaffected.

Question 57

Belinda expects that her wages will increase over time.What theory justifies this expectation?

A) compensating differential
B) life-cycle wage pattern
C) efficiency wage
D) occupational crowding
E) samaritan's dilemma

Question 58

What theory would suggest that a Nobel Prize-winning economist should earn significantly more than other economists?

A) samaritan's dilemma
B) life-cycle wage pattern
C) efficiency wage
D) compensating differential
E) winner-take-all

Question 59

What differentiates the U.S.income inequality ratio from that found in less-developed countries?

A) It is higher than in less-developed countries due to the large number of poor people.
B) In less-developed countries,the inequality ratio is lower than in the United States due to the large number of rich people.
C) In the United States,it is lower than that found in less-developed countries because the poor in the United States earn more than the poor in less-developed countries.
D) There is no significant difference between the inequality ratios in the United States and in less-developed countries.
E) In the United States,it is lower than in less-developed countries due to corruption.

Question 60

Which statement best represents the phenomenon of occupational crowding?

A) Women tend to be overrepresented in certain jobs.
B) Women and men are equally represented in all occupations.
C) A woman might earn less than a man because she has less education.
D) Women find themselves earning more than equally capable men.
E) Women have their work career interrupted during their childbearing years.

Question 61

Use the following table,which represents the distribution of income in the countries of Mircalla and Baldovinia,to answer the following questions:

What is the degree of income inequality in Baldovinia?

A) .0075
B) 0.75
C) 7.5
D) 750
E) 7,500

Question 62

Approximately ________ percent of income is earned by the poorest 20 percent of households in the United States?

A) 3.2
B) 15.6
C) 20.1
D) 25.3
E) 10.4

Question 63

Economists believe the level of inequality in less developed countries is overstated because it doesn't take ________ into account.

A) corruption
B) income from low-paying jobs
C) investments in human capital
D) goods and services produced within the home
E) discrimination

Question 64

The approximate poverty rate for minority women who are heads of household in the United States is ________ percent.

A) 10
B) 20
C) 38
D) 50
E) 75

Question 65

Use the following table,which represents the distribution of income in the countries of Traubia and Ginsland,to answer the following questions:

What is the degree of income inequality in Traubia?

A) 0.1
B) 1
C) 10
D) 100
E) 1,000

Question 66

Use the following table,which represents the distribution of income in the countries of Traubia and Ginsland,to answer the following questions:

What is the degree of income inequality in Ginsland?

A) 0.3
B) 3
C) 30
D) 300
E) 25,000

Question 67

As a recent college graduate,Dora has a temporary inability to pay her rent and is forced to move back to her old bedroom in her parent's house.Dora's parents,having taken an economics class decades ago,may be unconcerned with her current low-income situation because they think she

A) lacks income mobility.
B) is among the long-term poor.
C) is among the marginal poor.
D) is a victim of the samaritan's dilemma.
E) is a victim of corruption.

Question 68

Which of the following represents an in-kind transfer?

A) a scholarship
B) an income tax refund
C) a Social Security check
D) an unemployment insurance check
E) food supplements received through the Subsidized Nutrition Assistance Program

Question 69

Income mobility represents the ________ of a worker to ________.

A) inability; move to a job.
B) inability; be trained and earn less.
C) inability; be trained and earn more.
D) ability; move to a job where he or she can earn the most.
E) ability; move up or down the economic ladder.

Question 70

Given the following information,what is the inequality ratio?

A) 3
B) 8
C) 10
D) 80
E) 8,000

Question 71

Given the following information,what is the inequality ratio?

A) 5
B) 86
C) 9
D) 21
E) 43

Question 72

The poverty rate is calculated as the percentage of the population

A) who are not working.
B) who are unable to pay their food and housing expenses.
C) who are not earning sufficient income from labor.
D) whose incomes are above a poverty threshold.
E) whose incomes are below a poverty threshold.

Question 73

Use the following table,which represents the distribution of income in the countries of Mircalla and Baldovinia,to answer the following questions:

What is the degree of income inequality in Mircalla?

A) .05
B) 0.5
C) 5
D) 50
E) 500

Question 74

Approximately ________ percent of income is earned by the richest 20 percent of households in the United States?

A) 90
B) 10
C) 50
D) 80
E) 20

Question 75

How does the level of income inequality in the United States compare to that in other countries?

A) There is less income inequality in the United States when compared to other,more developed countries,and less in the United States when compared to less developed countries.
B) There is greater income inequality in the United States when compared to other developed countries,and less in the United States when compared to less developed countries.
C) There is less income inequality in the United States when compared to other,more developed countries,and greater income inequality in the United States when compared to less developed countries.
D) There is greater income inequality in the United States when compared to other,more developed countries,and greater income inequality in the United States when compared to less developed countries.
E) There are no differences in income inequality between the United States and most other countries in the world.

Question 76

The approximate poverty rate for children in the United States is ________ percent.

A) 0.5
B) 6
C) 10
D) 20
E) 31

Question 77

One of the causes of poverty in the United States is

A) high worker productivity.
B) low levels of education.
C) antidiscrimination laws.
D) government involvement in the marketplace.
E) the existence of economic prosperity in the macroeconomy.

Question 78

The movement of individuals and households from one income range to another is called

A) income mobility.
B) wealth mobility.
C) in-kind transfers.
D) the samaritan's dilemma.
E) a compensating differential.

Question 79

In a discussion with Tyrice's mother,who is an economist,Tyrice says,"I am living in poverty,I cannot be expected to buy you a birthday gift." She replies that technically Tyrice is not living in poverty because his income is above the

A) poverty rate.
B) poverty threshold.
C) negative income tax rate.
D) inequality ratio.
E) in-kind transfer rate.

Question 80

In the United States,there is a strong belief that anyone willing to work hard is able to become rich.This belief reflects which of the following theories?

A) efficiency wage
B) income mobility
C) samaritan's dilemma
D) compensating differential
E) occupational crowding