Question 1

Alyssa currently earns $105,000 a year, while her junior partner, Oakley, earns $65,000 a year. From the perspective of a utilitarian, if both of their incomes are subject to diminishing marginal utility, taking a dollar from Alyssa and giving it to Oakley will

Accepted Answer

Taking a dollar from Alyssa, who has a higher income, and giving it to Oakley, who has a lower income, will increase society's total utility because the marginal utility of income is higher for Oakley than for Alyssa due to diminishing marginal utility.

Question 2

In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,

Accepted Answer

The parable suggests that redistribution efforts are inefficient due to "leaky buckets," meaning resources are lost in the process. Therefore, striving for complete income equality may not be feasible or efficient.

Question 3

Which of the following statements is characteristic of utilitarianism?

Accepted Answer

Utilitarianism is a moral theory that suggests actions are right if they are useful or for the benefit of a majority. It emphasizes the greatest happiness or utility principle, where the goal is to maximize overall happiness or utility. Statement A reflects a utilitarian perspective by suggesting that redistributing income to poorer individuals can increase overall utility, as an extra dollar is more valuable to someone with less money. This aligns with the utilitarian focus on maximizing happiness or utility across society.

Question 4

When designing public policies, which income group would philosopher John Rawls argue needs the most attention?

Accepted Answer

John Rawls, in his theory of justice, argues for prioritizing the least well-off in society, which corresponds to individuals in the bottom fifth of the income distribution. His principle of "maximin" suggests that social and economic inequalities should be arranged so that they are to the greatest benefit of the least advantaged members of society.

Question 5

Suppose that Jamal is moving to a state where personal incomes are distributed randomly. If Jamal believes in liberalism, he would prefer

Accepted Answer

Liberalism often emphasizes equality and fairness, so Jamal would prefer an income distribution that is relatively equal.

Question 6

Scenario 20-1
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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 minus $20,000.
-Refer to Scenario 20-1. Which group would be most in favor of the switch from the current progressive tax policy to the new policy?

Accepted Answer

The answer of Scenario 20-1
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The government is proposing switching from...

Question 7

Which group (or groups) would be the most upset by wide variation in the income distribution?

Accepted Answer

Utilitarians and liberals would be most upset by wide variation in the income distribution because utilitarians seek to maximize overall happiness, which can be negatively impacted by large income disparities. Liberals often advocate for more equitable income distribution and social justice, making them likely to be concerned about significant income inequality. Libertarians, on the other hand, prioritize individual freedom, including the right to accumulate wealth, and may be less concerned with income distribution per se.

Question 8

Scenario 20-1
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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 minus $20,000.
-Refer to Scenario 20-1. What would libertarians think of the tax two policies?

Accepted Answer

Libertarians generally oppose policies that involve income redistribution, viewing them as interference with individual freedom and the free market. Both the current progressive tax system and the proposed flat tax system with a deduction involve some level of income redistribution, which libertarians would likely oppose.

Question 9

Which of the following statements is correct?

Accepted Answer

The Earned Income Tax Credit (EITC) is designed to benefit working individuals and families, particularly those with children, by providing a refundable tax credit based on income and family size. However, because it is contingent on earned income, individuals who are unable to work due to disabilities and thus do not have earned income would not benefit from the EITC, highlighting a disadvantage of the program for this specific group.

Question 10

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

Accepted Answer

Liberalism emphasizes fairness and equal opportunity, often advocating for policies that help the least advantaged in society, which in this scenario is Piper. This approach is in line with the idea of increasing Piper's utility to promote social justice and equality.

Question 11

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

Accepted Answer

Total utility is unlikely to remain constant when government policies are enacted to make the distribution of income more equitable. Such policies often aim to increase the utility of lower-income individuals through redistribution, which can change the overall utility in the society.

Question 12

Critics of raising the minimum wage argue that

Accepted Answer

Critics argue that minimum-wage laws are imprecise because they might not effectively target the working poor, as not all minimum wage earners are from poor households. This imprecision is a common criticism, focusing on the mismatch between the policy's intentions and its actual effects on poverty alleviation.

Question 13

According to the maximin criterion, income should be transferred from the rich to the poor as long as it

Accepted Answer

The maximin criterion focuses on maximizing the welfare of the least well-off in society, so income should be transferred from the rich to the poor as long as it raises the well-being of the least fortunate.

Question 14

Which of the following statements is not correct?

Accepted Answer

The statement that the elderly are more likely to be poor than single mothers is not correct. In fact, poverty rates among single mothers are typically higher than among the elderly, largely due to social security and other retirement benefits that help reduce poverty rates among the elderly.

Question 15

Figure 20-4 -Refer to Figure 20-4. If the government imposes a minimum wage above W₀, it is likely to

Accepted Answer

Imposing a minimum wage above the equilibrium level (W₀) creates a surplus of labor, as the quantity of labor supplied exceeds the quantity of labor demanded, leading to a reduction in employment below the equilibrium level (L₀).

Question 16

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

Accepted Answer

Utilitarianism is a principle in ethics and political philosophy that suggests actions or policies should aim to maximize the overall happiness or utility of the greatest number of people. Therefore, it supports the idea of maximizing the sum of all individuals' utility, not focusing on redistributing wealth or utility from the better-off to the worse-off specifically.

Question 17

A utilitarian government will pursue policies that redistribute income from the rich to the poor. One problem with these policies is that

Accepted Answer

Redistributive policies can reduce the incentive for everyone to work hard by diminishing the rewards for higher income and reducing the immediate need for income among those receiving transfers.

Question 18

Scenario 20-2
Suppose that a society is made up of five families whose incomes are as follows:
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$120,000; $90,000; $30,000; $30,000; and $18,000.
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The federal government is considering two potential income tax plans:
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Plan A is a negative income tax plan where the taxes owed equal 1/3 of income minus $20,000.
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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.
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-Refer to Scenario 20-2. Assuming that utility is directly proportional to the cash value of after-tax income, which government policy would an advocate of libertarianism prefer?

Accepted Answer

Libertarianism emphasizes minimal state intervention in the lives of individuals and is against forcible income redistribution, which both Plan A and Plan B involve.

Question 19

"An extra dollar of income gives more additional satisfaction to a poor person than to a rich person." This is an important assumption of which political philosophy?

Accepted Answer

This assumption aligns with Utilitarianism, which focuses on maximizing happiness and well-being for the greatest number of people. It suggests that redistributing wealth from richer to poorer individuals can increase overall happiness, as the marginal utility of money decreases with wealth.

Question 20

Marco earns more than Antonio. A legislator proposes taxing Marco to supplement Antonio's income. A libertarian would view this proposal as

Accepted Answer

Libertarians generally believe in minimal government intervention in the lives of individuals, including economic affairs. They would view the proposal to tax Marco to supplement Antonio's income as an inappropriate role for government, arguing that the government should not engage in redistributing income from one individual to another.

Quiz 20: Income Inequality and Poverty