Question 1

Table 20-14
James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income.  ​
​
-Refer to Table 20-14. According to the table, what percentage of individuals in Marketsville have an income below $64,000?
A)20 percent
B)40 percent
C)60 percent
D)80 percent

Accepted Answer

Out of the 5 individuals, 2 have an income below $64,000 (James and Luke). Therefore, 40% of individuals in Marketsville have an income below $64,000 (2/5 = 0.4, or 40%).

Question 2

The invisible hand of the marketplace acts to allocate resources
A)efficiently but does not necessarily ensure that resources are allocated fairly.
B)both fairly and efficiently.
C)fairly but does not necessarily ensure that resources are allocated efficiently.
D)neither fairly nor efficiently.

Accepted Answer

The invisible hand of the marketplace ensures that resources are allocated efficiently, meaning that they are used in a way that maximizes total benefit to society. However, it does not necessarily ensure that resources are allocated fairly or equitably among individuals or groups.

Question 3

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

Accepted Answer

Redistributing income involves making trade-offs between efficiency and equity. By redistributing income, the government may improve equity, but at the same time, it may reduce incentives to work, save, and invest, leading to a less efficient economy. Therefore, redistributing income involves the trade-off principle.

Question 4

Which of the following is correct?
A)Governments can never improve market outcomes.
B)Governments can sometimes improve market outcomes.
C)Governments can always improve market outcomes.
D)Government can never make the income distribution more equal.

Accepted Answer

While governments can't always improve market outcomes, there are situations where government intervention can improve outcomes. For example, the government can regulate harmful industries, provide public goods and services, and implement policies to prevent market failures. It is worth noting that government intervention can also have negative consequences, so it's important to assess each situation on a case-by-case basis. Option A is too extreme, and option C is impractical. Option D is incorrect - government policies can and have helped reduce income inequality.

Question 5

When the government redistributes income to achieve greater equality, it
A)distorts incentives.
B)improves efficiency.
C)focuses on middle income brackets.
D)relies on foreign aid to help balance the budget.

Accepted Answer

When the government redistributes income, it can create disincentives for individuals to work hard and earn more money since they may feel like their hard work will just be taken away through taxation. This can result in reduced economic activity and productivity.

Question 6

Table 20-14
James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income.  ​
​
-Refer to Table 20-14. Where would the government of Marketsville set the poverty line to have a poverty rate of 20 percent?
A)$23,000
B)$35,000
C)$44,000
D)$55,000

Accepted Answer

The answer of Table 20-14
James, Luke, Peter, Micah, and Sarah...

Question 7

Government programs that take money from high-income people and give it to low-income people typically
A)improve economic efficiency by reducing poverty.
B)reduce economic efficiency because they distort incentives.
C)have no effect on economic efficiency because they both reduce poverty and distort incentives.
D)sometimes improve, sometimes reduce, and sometimes have no effect on economic efficiency.

Accepted Answer

Government programs that redistribute income from high-income to low-income people create disincentives for high-income earners to work and produce, while creating incentives for low-income earners to work less and receive more government assistance. This reduces economic efficiency, as resources are not being allocated in the most productive way. However, it can also be argued that reducing poverty can lead to long-term economic growth by providing opportunities for more individuals to participate in the economy.

Question 8

In the U.S. economy, labor earnings make up about
A)one-half of total income.
B)two-thirds of total income.
C)three-fourths of total income.
D)nine-tenths of total income.

Accepted Answer

According to the Bureau of Economic Analysis, labor earnings make up approximately two-thirds of total income in the U.S. economy, with the other one-third coming from sources such as profits, rental income, and government transfers.

Question 9

When the government enacts policies to redistribute income,
A)the objective is to enhance efficiency and a side effect is that the allocation of resources becomes more equal.
B)the objective is to enhance efficiency and a side effect is that the allocation of resources becomes less equal.
C)the objective is to enhance equality and a side effect is that the allocation of resources becomes more efficient.
D)the objective is to enhance equality and a side effect is that the allocation of resources becomes less efficient.

Accepted Answer

When the government enacts policies to redistribute income, the objective is to enhance equality by taking from the higher-income groups and giving to the lower-income groups. This may lead to a more equal distribution of resources, but it also creates disincentives for the higher-income groups to work harder and innovate, causing a decrease in efficiency. Therefore, the allocation of resources becomes less efficient as a side effect of the policy.

Question 10

Table 20-14
James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income.  ​
​
-Refer to Table 20-14. According to the table, what percentage of individuals in Marketsville have an income above $90,000?
A)40 percent.
B)60 percent.
C)80 percent.
D)100 percent.

Accepted Answer

The answer of Table 20-14
James, Luke, Peter, Micah, and Sarah...

Question 11

Winston Churchill once said
A)"The inherent virtue of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries."
B)"The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries."
C)"The inherent vice of capitalism is the unequal sharing of blessings. The inherent vice of socialism is the equal sharing of miseries."
D)"The inherent virtue of capitalism is the unequal sharing of blessings. The inherent vice of socialism is the equal sharing of miseries."

Accepted Answer

This is the correct quote by Winston Churchill. It contrasts the strengths and weaknesses of capitalism and socialism, implying that capitalism may lead to unequal distribution of wealth, but it also has the potential to create prosperity, while socialism may strive for equality, but it ultimately results in shared poverty.

Question 12

Table 20-13
The following table shows the distribution of income in Widgetapolis.  ​
-Refer to Table 20-13. If the poverty rate is 33%, where is the poverty line in Widgetapolis?
A)under $39,000
B)between $39,000 and $59,999
C)between $60,000 and $81,999
D)between $82,000 and $109,999

Accepted Answer

The poverty rate in Widgetapolis is 33%, which means that approximately one-third of the population earns below the poverty line. Looking at the table, we can see that the income range for 33% falls between $39,000 and $59,999, making choice (B) the correct answer.

Question 13

In the United States, labor earnings are about what percent of total income?
A)75 percent
B)70 percent
C)67 percent
D)50 percent

Accepted Answer

Labor earnings include wages, salaries, and benefits received by workers. In the US, as of 2019, labor earnings accounted for approximately 67 percent of total income, with the remaining 33 percent coming from sources such as property income, capital gains, and government transfers.

Question 14

Table 20-13
The following table shows the distribution of income in Widgetapolis.  ​
-Refer to Table 20-13. If the poverty rate is 19%, where is the poverty line in Widgetapolis?
A)under $39,000
B)between $39,000 and $59,999
C)between $60,000 and $81,999
D)between $82,000 and $109,999

Accepted Answer

The answer of Table 20-13
The following table shows the distribution...

Question 15

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

Accepted Answer

The marketplace allocates resources efficiently because resources are allocated to those who are willing and able to pay for them, resulting in the production of goods and services that are most highly valued by consumers. Although the marketplace may not always allocate resources equitably, it does allocate them efficiently. Choice A and C are incorrect because fairness and allocation to those desiring them least are not necessarily characteristics of the marketplace's resource allocation. Choice D is partially correct as the marketplace does allocate resources efficiently, but the term "equitably" is misleading as it implies fairness or equality, which may not always be the case in the marketplace.

Question 16

Which two of the Ten Principles of Economics are illustrated in this chapter?
A)A country's standard of living depends on its ability to produce goods & People face tradeoffs.
B)Prices rise when the government prints too much money & Governments can sometimes improve market outcomes.
C)Governments can sometimes improve market outcomes & People face tradeoffs.
D)People face tradeoffs & Prices rise when the government prints too much money .

Accepted Answer

The chapter illustrates the principles of "Governments can sometimes improve market outcomes" through discussions about government regulations and interventions in the market, and "People face tradeoffs" when making choices between different options, such as saving money now versus investing for the future.

Question 17

Which of the following is most likely to occur when the government enacts policies to make the distribution of income more equal?
A)a more efficient allocation of resources
B)a distortion of incentives
C)unchanged behavior
D)All of the above are correct.

Accepted Answer

When the government enacts policies to make the distribution of income more equal, it often results in a distortion of incentives. This is because individuals may be less motivated to work hard and innovate if they know that their income will be heavily taxed or redistributed to others. This can lead to a less efficient allocation of resources overall. Option A is not correct, as policies to make income distribution more equal may not necessarily lead to a more efficient allocation of resources. Option C is not correct, as policies to make income distribution more equal will likely result in some changes in behavior, particularly among those who perceive their income to be unfairly redistributed.

Question 18

A government's policy of redistributing income makes the income distribution
A)more equal, distorts incentives, alters behavior, and makes the allocation of resources more efficient.
B)more equal, distorts incentives, alters behavior, and makes the allocation of resources less efficient.
C)less equal, distorts incentives, alters behavior, and makes the allocation of resources more efficient.
D)less equal, distorts incentives, alters behavior, and makes the allocation of resources less efficient.

Accepted Answer

Government redistribution policies aim to make income distribution more equal by taking from the rich and giving to the poor. However, this often distorts incentives and alters behavior, as those who are taxed heavily may be less likely to work hard or invest in their businesses. Additionally, the allocation of resources may become less efficient as the government may not have the same market-driven incentives to allocate resources in the most productive way. Therefore, although redistribution may address income inequality, it often has negative economic consequences.

Quiz 20: Income Inequality and Poverty

Table 20-14 James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income. -Refer to Table 20-14. According to the table, what percentage of individuals in Marketsville have an income below $64,000?

The invisible hand of the marketplace acts to allocate resources

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

Which of the following is correct?

When the government redistributes income to achieve greater equality, it

Table 20-14 James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income. -Refer to Table 20-14. Where would the government of Marketsville set the poverty line to have a poverty rate of 20 percent?

Government programs that take money from high-income people and give it to low-income people typically

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

When the government enacts policies to redistribute income,

Table 20-14 James, Luke, Peter, Micah, and Sarah are the only five inhabits of Marketsville. The following table shows their income. -Refer to Table 20-14. According to the table, what percentage of individuals in Marketsville have an income above $90,000?

Winston Churchill once said

Table 20-13 The following table shows the distribution of income in Widgetapolis. -Refer to Table 20-13. If the poverty rate is 33%, where is the poverty line in Widgetapolis?

In the United States, labor earnings are about what percent of total income?

Table 20-13 The following table shows the distribution of income in Widgetapolis. -Refer to Table 20-13. If the poverty rate is 19%, where is the poverty line in Widgetapolis?

The marketplace allocates resources

Which two of the Ten Principles of Economics are illustrated in this chapter?

Which of the following is most likely to occur when the government enacts policies to make the distribution of income more equal?

A government's policy of redistributing income makes the income distribution