Question 1

There are 100 people in society and they have to decide on an income distribution from behind the veil of ignorance. Use the maximin principle to decide which of the following income distributions would be selected by a Rawlsian liberal. Explain your answer.
In state A, eight people earn $10m, 92 people earn $5m
In state B, 40 people earn $10m and 59 people earn $7m and 1 person earns $1m.

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Question 2

Graph 21-1 -Refer to Graph 21-1. According to the graph, if the government imposes a minimum wage below W_o, it is likely to:

Accepted Answer

According to the graph, if the government imposes a minimum wage below W_o, it will intersect with the labor demand curve at a point below the intersection with the labor supply curve, resulting in a decrease in employment to a level below Q_o. Therefore, option C is the correct answer.

Question 3

For most government programs that are designed to help the poor:

Accepted Answer

Being poor, by itself, is typically not sufficient to qualify for assistance. Most government programs have specific eligibility requirements, such as income limits, household size, employment status, or disability.

Question 4

Explain what is meant by 'in-kind transfer' programs. Briefly outline the pros and cons associated with an in-kind transfer program.

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Question 5

What is meant by a perfectly equal distribution of income? Use a graph to depict such a situation.

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Question 6

What effect has increased workforce participation by women since the 1950s had on income inequality in Australia? Why is this the case?

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Question 7

What are some of the problems associated with measuring inequality?

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Question 8

Opponents of legislation that proposes to limit the time a family can receive welfare benefits are most likely to argue that time limits are undesirable because:

Accepted Answer

Opponents of time limits on welfare benefits argue that families forced off welfare will likely face increased financial instability, which can negatively impact children's health, education, and future prospects. They argue that children should not be punished for the actions of their parents and that society has an obligation to support families in need.

Question 9

Evidence suggests that:

Accepted Answer

Studies have shown that the longer a family is on welfare, the harder it is to get off welfare due to various factors such as loss of skills, lack of job opportunities, and generational poverty. Option A is not supported by evidence as studies have shown that restrictions on welfare do not deter immigrants from coming to the US. Option B is speculative and not supported by evidence. Option C is not accurate as studies have shown that the majority of welfare recipients want to work and become self-sufficient.

Question 10

Many people have been critical of statistics that are used to characterise income inequality on the grounds that as long as the average income of the poor is increasing, their position relative to the rich should not matter. Evaluate this critique.

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Question 11

A tax system that collects revenue from high-income households and gives transfers and tax concessions to low-income households is known as:

Accepted Answer

This type of tax system is known as a negative income tax, as it provides income transfers in the form of tax refunds or credits to low-income households. It is designed to reduce poverty and income inequality. Social security refers to a specific government program that provides retirement benefits, while minimum wage laws and in-kind transfers are not directly related to the tax system.

Question 12

Do Libertarians and Rawlsian liberals agree that governments should redistribute income? Briefly explain your answer.

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Question 13

Discuss the life cycle hypothesis of income distribution.

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Question 14

Discuss the permanent income hypothesis of income distribution.

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Question 15

Explain the concept of diminishing marginal utility and describe the role that it plays in the utilitarian argument for redistribution of income.

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Question 16

Table 21-1

Given Table 21-1, which country has a more equally distributed income? Explain your answer.

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The answer of Table 21-1

Given Table 21-1, which country has...

Question 17

A school voucher system introduced in the United States has lead to:

Accepted Answer

The school voucher system introduced in the United States has led to more low-income households sending their children to private schools. Vouchers provide financial assistance to families who cannot afford private school tuition, making it more accessible to them. This has resulted in an increase in the number of low-income households sending their children to private schools.

Question 18

Suppose the government proposes a negative income tax that calculates taxes owed according to the formula TAXES OWED = (1/4 * INCOME) - $15 000. Suppose a family only earns $20 000. How much tax would they pay?

Accepted Answer

Using the formula, TAXES OWED = (1/4 * $20 000) - $15 000 = $5000 - $15 000 = -$10 000. This negative result indicates that the family will receive a net income subsidy of $10 000.

Question 19

Suppose the government proposes a negative income tax that calculates taxes owed according to the formula TAXES OWED = (1/2 * INCOME) - $5000. A family that earns an income of $30 000 will:

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Question 20

Graph 21-1
 
-Refer to Graph 21-1. Advocates of minimum wage legislation would suggest that an effective minimum wage would be set at a level:

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The answer of Graph 21-1
 
-Refer to Graph 21-1. Advocates...

Quiz 21: Income Inequity and Poverty

Graph 21-1 -Refer to Graph 21-1. According to the graph, if the government imposes a minimum wage below Wo, it is likely to: