Question 1

Which of the following statements is not correct?

Accepted Answer

A) An advantage of an in-kind transfer is that it prevents an alcoholic from spending a cash benefit on alcohol. 
B) An advantage of the Supplemental Security Income (SSI) program is that it benefits the sick and disabled. 
C) An advantage of a negative income tax program is that the poor must work to be eligible. 
D) Minimum wage laws result in higher unemployment among those groups of workers affected by the minimum wage.

Question 2

In the United States, a typical worker's income peaks around age

Accepted Answer

A) 70. 
B) 60. 
C) 50. 
D) 40.

Question 3

The income level below which families are said to be poor is known as the

Accepted Answer

A) income maintenance threshold. 
B) poverty line. 
C) bottom quintile of the income distribution. 
D) minimum wage.

Question 4

Suppose the average value of in-kind transfers increases by $2,000 from 2013 to 2014. The poverty rate

Accepted Answer

A) is more likely to understate the true level of poverty. 
B) is more likely to overstate the true level of poverty. 
C) will increase by $2,000 divided by the poverty level. 
D) Both b and c are correct.

Question 5

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

The answer of Assume that the government proposes a negative...

Question 6

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.

Question 7

"The government should choose policies to maximize the total utility of society." This statement is most closely associated with which political philosophy?

Accepted Answer

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

Question 8

Suppose society consists of three individuals: Phil, Jay, and Mitchell. Phil has $60,000 of income, Jay has $200,000 of income, and Mitchell has $100,000 of income. A utilitarian would argue that

Accepted Answer

A) taking $1 from Mitchell and giving it to Phil would increase society's total utility. 
B) taking $1 from Mitchell and giving it to Jay would increase society's total utility. 
C) taking $1 from Phil and giving it to Jay would increase society's total utility. 
D) None of the above are correct because all three individuals have sufficient income.

Question 9

Which of the following represents a problem in measuring inequality?

Accepted Answer

A) Measurements of income distributions typically include in-kind transfers, which distort the measure of inequality. 
B) A normal life-cycle pattern causes inequality in the income distribution but may not reflect inequality in living standards. 
C) Transitory income is a better measure of inequality than permanent income. 
D) Both a and b are correct.

Question 10

Scenario 20-7
Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax system in which
Taxes owed = (1/4 of income) - $15,000.
-Refer to Scenario 20-7. Zooey's friend Alfredo owes $0 in taxes. How much does he earn?

Accepted Answer

The answer of Scenario 20-7
Zooey is a single mother of...

Question 11

The maximin criterion is attributed to which political philosophy?

Accepted Answer

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

Question 12

Which of the Ten Principles of Economics do governments run into when they redistribute income to achieve greater equality?

Accepted Answer

A) Trade can make everyone better off. 
B) The cost of something is what you give up to get it. 
C) People face trade-offs. 
D) Markets are usually a good way to organize economic activity.

Question 13

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.

Question 14

Table 20-14
Income Inequality in the United States
The values in the table reflect the percentages of pre-tax-and transfer income.  Source: US Census Bureau
-Refer to Table 20-14. If the distribution of income were completely equal, what percentage of income would the bottom fifth of the population earn?

Accepted Answer

The answer of Table 20-14
Income Inequality in the United States
The...

Question 15

Scenario 20-3
Suppose that a society is made up of five families whose incomes are as follows:
$120,000; $90,000; $30,000; $30,000; and $18,000.
The federal government is considering two potential income tax plans:
Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
Plan B is a two-tiered plan where families earning less than $35,000 pay no income tax and families earning more than $35,000 pay 10% of their income in taxes. The income tax revenue collected from those families earning over $35,000 is then redistributed equally to those families earning less than $35,000.
-Refer to Scenario 20-3. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of liberalism prefer?

Accepted Answer

A) Plan A 
B) Plan B 
C) either Plan A or Plan B 
D) neither Plan A nor Plan B because any plan that forcibly redistributes income is against the philosophy

Question 16

Scenario 20-8
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) - $14,000
​
​
-Refer to Scenario 20-8. This negative income tax ensures that families earn at least $56,000​.

Accepted Answer

A) True 
 B)False

Question 17

Liberalism is founded on a premise that behind a "veil of ignorance,"

Accepted Answer

A) justice cannot be agreed upon. 
B) everyone's income should be equal. 
C) everyone would agree to "just" rules to reallocate income. 
D) society should maximize the sum of individual utilities.

Question 18

Table 20-5
Distribution of Income in Umakastan 
-Refer to Table 20-5. Approximately what percentage of families in Umakastan have income levels below $74,000?

Accepted Answer

A) 27% 
B) 28% 
C) 52% 
D) 79%

Question 19

The goal of libertarianism is to

Accepted Answer

A) redistribute income based on the assumption of diminishing marginal utility. 
B) redistribute income in order to maximize the well-being of the worst-off person in society. 
C) punish crimes and enforce voluntary agreements but not to redistribute income. 
D) measure happiness and satisfaction.

Question 20

Which of the following will not occur when government policies are enacted to make the distribution of income more equitable?

Accepted Answer

A) People will alter their behaviors. 
B) Incentives will be distorted. 
C) Total utility will likely remain constant. 
D) The allocation of resources will be less efficient .

Exam 20: Income Inequality and Poverty

Which of the following statements is not correct?

In the United States, a typical worker's income peaks around age

The income level below which families are said to be poor is known as the

Suppose the average value of in-kind transfers increases by $2,000 from 2013 to 2014. The poverty rate

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

Which of the following statements is not correct?

"The government should choose policies to maximize the total utility of society." This statement is most closely associated with which political philosophy?

Suppose society consists of three individuals: Phil, Jay, and Mitchell. Phil has $60,000 of income, Jay has $200,000 of income, and Mitchell has $100,000 of income. A utilitarian would argue that

Which of the following represents a problem in measuring inequality?

The maximin criterion is attributed to which political philosophy?

Which of the Ten Principles of Economics do governments run into when they redistribute income to achieve greater equality?

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?

Scenario 20-8 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) - $14,000 -Refer to Scenario 20-8. This negative income tax ensures that families earn at least $56,000.

Liberalism is founded on a premise that behind a "veil of ignorance,"

Table 20-5 Distribution of Income in Umakastan -Refer to Table 20-5. Approximately what percentage of families in Umakastan have income levels below $74,000?

The goal of libertarianism is to

Which of the following will not occur when government policies are enacted to make the distribution of income more equitable?

Exam 20: Income Inequality and Poverty

Which of the following statements is not correct?

In the United States, a typical worker's income peaks around age

The income level below which families are said to be poor is known as the

Suppose the average value of in-kind transfers increases by $2,000 from 2013 to 2014. The poverty rate

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

Which of the following statements is not correct?

"The government should choose policies to maximize the total utility of society." This statement is most closely associated with which political philosophy?

Suppose society consists of three individuals: Phil, Jay, and Mitchell. Phil has $60,000 of income, Jay has $200,000 of income, and Mitchell has $100,000 of income. A utilitarian would argue that

Which of the following represents a problem in measuring inequality?

The maximin criterion is attributed to which political philosophy?

Which of the Ten Principles of Economics do governments run into when they redistribute income to achieve greater equality?

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?

Scenario 20-8 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) - $14,000 ​ ​ -Refer to Scenario 20-8. This negative income tax ensures that families earn at least $56,000​.

Liberalism is founded on a premise that behind a "veil of ignorance,"

Table 20-5 Distribution of Income in Umakastan -Refer to Table 20-5. Approximately what percentage of families in Umakastan have income levels below $74,000?

The goal of libertarianism is to

Which of the following will not occur when government policies are enacted to make the distribution of income more equitable?

Scenario 20-8 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) - $14,000 -Refer to Scenario 20-8. This negative income tax ensures that families earn at least $56,000.