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1
If the top quintile (fifth) of all families receives 48 percent of total income and the lowest quintile receives 4 percent of total income, we can conclude that:
A)the resulting Lorenz curve will be a 45-degree straight line.
B)the top quintile receives twelve times as much income as the lowest quintile.
C)the middle quintile must receive 60 percent of all income.
D)government must be subsidizing the top quintile.
2
The Gini ratio:
A)measures the relative extent of poverty in a nation.
B)compares the income of persons, households, or families at the 90th percentile of the income distribution to the income at the 10th percentile.
C)is a numerical measure of the overall dispersion of income in a nation.
D)is found by dividing the entire area below and to the right of the diagonal in the Lorenz diagram by the area between the diagonal and Lorenz curve.
3

Use the following to answer questions 3-4:

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Refer to the above diagram where curves (a) through (e) are for five different countries. The Gini ratio is lowest in country:

A)(a).
B)(b).
C)(c).
D)(d).
4
Refer to the above diagram where curves (a) through (e) are for five different countries. Of the countries listed below, income is most unequally distributed in country:
A)(a).
B)(b).
C)(c).
D)(d).
5
Differences in the amounts and quality of education and training:
A)combine with differences in mental, physical, and aesthetic talents to produce income inequality.
B)explain none of the income inequality in the United States.
C)explain nearly all the income inequality in the United States.
D)have lessened in the United States in the past decade, sharply reducing income inequality.
6
One cause of income inequality in the United States is:
A)the free public school system.
B)differences in preferences for market work relative to nonmarket activities as well as differences in preferences for types of work.
C)antidiscrimination laws.
D)the social security system.
7
The distribution of wealth in the United States is such that it:
A)is randomly distributed among income classes.
B)has no perceptible impact on the distribution of income.
C)reduces income inequality.
D)contributes to income inequality.
8
Which of the following helps explain growing income inequality in the United States in recent years?
A)reduced immigration
B)increased demand for highly skilled workers
C)the falling labor force participation rate of women
D)increased power of unions
9
Economists generally agree that the most significant cause of the recent increase in income inequality in the United States is:
A)the failure of the legal minimum wage to keep pace with inflation.
B)increased international competition.
C)increased immigration.
D)increased demand for, and hence pay to, highly skilled workers.
10
The entrance of large numbers of "baby boomers" into the labor force in the 1970s and 1980s:
A)caused substantial reductions in permanent unemployment.
B)lessened income inequality.
C)increased income inequality.
D)had no impact on income inequality.
11
The basic economic argument for greater income equality is that:
A)an equal distribution of income is the logical outcome of any tax-transfer program.
B)because citizens enjoy political equality, they are also entitled to economic equality.
C)a more equal distribution of income will tend to maximize incentives to work, invest, and assume risk.
D)a more equal distribution of a given amount of income will increase the total utility of consumers.
12

Use the following to answer questions 12-13:

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Refer to the above diagrams that show identical marginal utility from income curves for Singer and Catalano. The marginal utility from income curves are drawn on the assumption that:

A)Singer buys more inferior goods than does Catalano.
B)Singer and Catalano have identical capacities to enjoy income.
C)Catalano has a greater capacity to enjoy income than does Singer.
D)Singer has a greater capacity to enjoy income than does Catalano.
13
Refer to the above diagrams that show identical marginal utility from income curves for Singer and Catalano. If a given income of $20,000 is initially distributed so that Singer receives $15,000 and Catalano $5,000:
A)no judgment can be made as to the effect of a redistribution of income on total utility.
B)this initial distribution of income is maximizing the combined total utility of the two consumers.
C)the combined total utility of the two consumers can be increased by redistributing income from Catalano to Singer.
D)the combined total utility of the two consumers can be increased by redistributing income from Singer to Catalano.
14
The poverty rate in the United States was:
A)about 5 percent in 2004.
B)higher in 2004 than in 1960.
C)lower in 2004 than in 1993.
D)about 13 percent in 2004.
15
An increase in the poverty rate:
A)will necessarily shift the Lorenz curve toward the diagonal.
B)will necessarily shift the Lorenz curve away from the diagonal.
C)may leave the Lorenz curve unchanged.
D)normally accompanies strong growth of the economy.
16
Which of the following statements about U.S. poverty is true?
A)Foreign-born individuals who are not citizens have lower poverty rates than does the general population.
B)The poverty in rural areas is highly visible to the general population.
C)An estimated one-half of the people in poverty remain there for less than 2 years before climbing out of poverty.
D)Poverty necessarily increases when income inequality rises.
17
Which of the following is a social insurance program?
A)TANF
B)Medicaid
C)Supplemental Security Income
D)unemployment compensation
18
Which of the following is a public assistance or welfare program as opposed to a social insurance program?
A)Supplemental Security Income (SSI)
B)unemployment compensation
C)Medicare
D)Social Security
19
Which of the following would move the Lorenz curve closer to the diagonal?
A)a 20 percent boost in Social Security retirement benefits
B)an increase in payroll taxes
C)a reduction in the progressiveness of the Federal personal income tax
D)the elimination of the TANF program
20
Welfare reform enacted in 1996:
A)required welfare recipients to work after receiving assistance for 2 years.
B)replaced food stamps with cash grants.
C)provided life-time free health insurance benefits for those permanently leaving welfare for work.
D)greatly increased the minimum income level of the former AFDC program (now TANF).







McConnell, Microeconomics 17eOnline Learning Center

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