Question 1

When the government redistributes income from the wealthy to the poor,

Accepted Answer

Redistributing income from the wealthy to the poor can lead to decreased incentives for both groups to work hard. Wealthy individuals may work less because a larger portion of their income is taken away, while poor individuals may work less because they receive income without needing to work for it. This can result in a decrease in overall productivity and the production of fewer goods and services.

Question 2

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

Government policies that redistribute income and wealth from the wealthy to the poor enhance equality by reducing the wealth gap between the rich and poor. However, it may not necessarily enhance efficiency or increase the reward for working hard.

Question 3

When society gets the most it can from its scarce resources, then the outcome is called

Accepted Answer

When society gets the most it can from its scarce resources, it is said to be efficient. Efficiency means that resources are allocated in a way that maximizes the satisfaction of human needs and wants. This occurs when every good or service is produced at the lowest possible cost and in the quantities that provide the greatest possible benefit.

Question 4

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Accepted Answer

Redistributing the tax revenue from the wealthy to the poor is likely to be more equal in terms of reducing income inequality, but it may be less efficient in terms of economic growth and productivity. The wealthy may be discouraged from working and investing if they are taxed at high rates, while the poor may become reliant on government assistance rather than seeking employment opportunities. Overall, the trade-off between equality and efficiency is a complex one and depends on the specific context and policies involved.

Question 5

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

Accepted Answer

An economist would recognize both the equity and efficiency concerns raised by Senators Brown and Johnson, and would seek to find a solution that balances these concerns. It is not necessarily the case that a tax on high incomes will discourage successful people from working, as the impact will depend on how the tax is structured and how the revenue is used. However, it is important to consider the potential tradeoffs between equity and efficiency in order to make a good decision.

Question 6

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

Accepted Answer

The tradeoff described in the statement is between efficiency (getting the most from scarce resources) and equality (fair distribution of resources). Choice A, guns and butter, refers to a tradeoff between military and consumer goods production. Choice C, inflation and unemployment, refers to the Phillips curve tradeoff between price level stability and employment levels. Choice D, work and leisure, is a personal choice tradeoff rather than a societal one.

Question 7

Which of the following words and phrases best captures the notion of equality?

Accepted Answer

The idea of equality is closely related to sameness, meaning that all individuals should have the same rights, opportunities and treatment. The other options may have different connotations or associations, but they do not directly relate to the concept of equality.

Question 8

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Accepted Answer

The answer of As a result of a successful attempt...

Question 9

Which of the following phrases best captures the notion of efficiency?

Accepted Answer

Efficiency is about getting the most output from the least input, meaning avoiding any unnecessary waste. Therefore, the phrase "minimum waste" best captures the notion of efficiency.

Question 10

Government policies designed to equalize the distribution of economic well-being include
I.the welfare system
Ii. unemployment insurance
Iii. progressive income tax

Accepted Answer

The welfare system and unemployment insurance can help provide assistance to those in need, and the progressive income tax helps to redistribute wealth from higher-income earners to those with lower incomes. Therefore, all three policies aim to equalize the distribution of economic well-being.

Question 11

When government policies are enacted,

Accepted Answer

The answer of When government policies are enacted,
...

Question 12

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

Accepted Answer

Equality refers to ensuring that benefits are distributed fairly and evenly among members of society, while efficiency refers to maximizing the benefits that can be gained from scarce resources. While both concepts are concerned with the overall benefits to society, they have different focuses and goals.

Question 13

When the government redistributes income from the wealthy to the poor,

Accepted Answer

Redistributing income from the wealthy to the poor increases equality since it reduces the income gap between the rich and the poor. However, it may reduce efficiency since the wealthy may have less motivation to work or invest if they know their income will be redistributed. Therefore, the best answer is B, where equality is improved but efficiency may not be.

Question 14

A certain state legislature is considering an increase in the state gasoline tax. Representative Campbell argues that an increase in the gasoline tax would harm low-income drivers disproportionately. Representative Richards responds by saying that low-income drivers own smaller cars that use less gasoline, and that low-income drivers therefore would not be harmed disproportionately.

Accepted Answer

The answer of A certain state legislature is considering an...

Question 15

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Accepted Answer

Progressive income tax rates increase equality by redistributing wealth from higher income individuals to lower income individuals, but they can also decrease efficiency by creating disincentives to work and invest for those in higher income brackets. This disincentive can cause them to work and invest less, which can harm the economy overall. Therefore, while equality is increased, efficiency may decrease.

Question 16

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

Accepted Answer

Senator Jackson's argument is focused on the efficiency of the economy, suggesting that replacing the income tax with a sales tax would stimulate output. Senator Feldman's objection is based on the distributional impact of the policy, suggesting that it would disproportionately benefit the wealthy and harm the poor. This makes her argument primarily about equality. Therefore, the best answer is D, with Senator Jackson's argument focused on efficiency and Senator Feldman's argument focused on equality.

Question 17

When the government attempts to improve equality in an economy the result is often

Accepted Answer

When the government attempts to improve equality in an economy, it often results in a reduction in efficiency because policies designed to redistribute income or wealth can create disincentives for people to work or invest, leading to a decrease in productivity and economic growth. Additionally, such policies can lead to market distortions and inefficiencies, as resources are allocated based on factors other than market demand and supply.

Question 18

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

Government policies that redistribute income and wealth from the wealthy to the poor may enhance equality, by providing support and resources to those who are in need. However, these policies may also reduce efficiency by redistributing resources away from those who may have used them most productively, and they may also reduce the reward for working hard if individuals perceive that their efforts are not being rewarded as much as they would be without the policies. Therefore, all three options are correct.

Question 19

Which of the following is true?

Accepted Answer

Efficiency refers to the size of the economic pie, i.e., how much total output is produced in the economy. Equality, on the other hand, refers to how this pie is divided among individuals, i.e., the distribution of income and wealth. These two goals are often in tension with each other, as policies that improve equality often come at the cost of efficiency, and vice versa. So, A is the correct answer.

B is not true because government policies often involve trade-offs between efficiency and equality. For example, redistributive policies such as progressive taxation can enhance equality but may discourage work effort and reduce efficiency in the long run.

C is not true because even if the pie gets larger, if the distribution of the pie is unequal, some people may still go hungry or not have access to the basic necessities of life.

D is not true because merely cutting the pie into equal pieces does not guarantee either efficiency or equality. Efficiency depends on how well resources are allocated and used to produce goods and services, while equality depends on how the pie is distributed among individuals, which can be affected by factors such as skills, education, and personal preferences.

Question 20

Government policies resulting in reduced efficiency include
I. the welfare system
Ii. unemployment insurance
Iii. progressive income tax

Accepted Answer

The welfare system and unemployment insurance provide financial assistance to those who are not working or earning income, which can create disincentives for individuals to seek employment or improve their skills to earn higher wages. This reduces efficiency in the labor market. The progressive income tax also creates disincentives for individuals to work harder or earn more income as they face higher tax rates. Thus, all three policies can reduce efficiency in the economy.

Quiz 1: Ten Principles of Economics

When the government redistributes income from the wealthy to the poor,

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

When society gets the most it can from its scarce resources, then the outcome is called

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

Which of the following words and phrases best captures the notion of equality?

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Which of the following phrases best captures the notion of efficiency?

Government policies designed to equalize the distribution of economic well-being include I.the welfare system Ii. unemployment insurance Iii. progressive income tax

When government policies are enacted,

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

When the government redistributes income from the wealthy to the poor,

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

When the government attempts to improve equality in an economy the result is often

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Which of the following is true?

Government policies resulting in reduced efficiency include I. the welfare system Ii. unemployment insurance Iii. progressive income tax