Question 1

As the value of the Gini coefficient approaches one

Accepted Answer

The Gini coefficient measures income inequality, where a higher value means greater inequality. Therefore, as the value of the Gini coefficient approaches one (its maximum value), income distribution becomes more unequal.

Question 2

What is the poverty rate?

Accepted Answer

The poverty rate is defined as the percentage of the population earning an annual income below the poverty line, according to the federal government's definition. This definition takes into account factors such as household size and location, and is used to determine eligibility for government assistance programs.

Question 3

As the value of the Gini coefficient approaches zero

Accepted Answer

The Gini coefficient is a measure of income inequality, with a range of 0 to 1. A Gini coefficient of 0 means perfect income equality, where everyone has the same income, while 1 means perfect income inequality, where one person has all the income. Therefore, as the Gini coefficient approaches zero, income distribution becomes less unequal, which is reflected in a decrease in the percentage of the population under the poverty line.

Question 4

Figure 18-3 
-Refer to Figure 18-3.The figure above shows a demand curve and two supply curves,one more elastic than the other.Use Figure 18-3 to answer the following questions.
a.Suppose the government imposes an excise tax of $1.00 on every unit sold.Use the graph to illustrate the impact of this tax.
b.If the government imposes an excise tax of $1.00 on every unit sold,will the consumer pay more of the tax if the supply curve is S1 or S2? Refer to the graphs in your answer.
c.If an excise tax of $1.00 on every unit sold is imposed,will the revenue collected by the government be greater if the supply curve is S1 or S2?
d.If the government imposes an excise tax of $1.00 on every unit sold,will the deadweight loss be greater if the supply curve is S1 or S2?

Accepted Answer

The answer of Figure 18-3 
-Refer to Figure 18-3.The figure...

Question 5

Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-6.Which country has the more unequal distribution of income?

Accepted Answer

The Lorenz curve for Syldavia is more bowed out from the line of equality, indicating a greater distance from perfect income equality. This suggests that Syldavia has a more unequal distribution of income compared to Islandia.

Question 6

Between 1980 and 2014,income inequality in the United States has increased in part due to expanding international trade.How does expanding international trade contribute to income inequality?

Accepted Answer

Expanding international trade allows domestic firms to hire low-skilled workers in other countries which puts US workers in competition with foreign workers. This results in the wages of unskilled workers being depressed relative to the wages of other workers.

Question 7

Article Summary
Monthly marijuana sales in Colorado topped $100 million for the first time in August,2015,with $59.2 million in recreational sales and $41.4 million in medical sales.Colorado has levied three types of state taxes on recreational-use marijuana: a 2.9% standard sales tax,a 10% special marijuana sales tax,and a 15% excise tax on wholesale marijuana transfers.The 15% excise tax is earmarked for school construction projects.In August,recreational-use taxes and fees totaled $11.2 million and medical taxes and fees were $2 million,bringing total revenue-to-date for the year to over $86 million.
-Refer to the Article Summary.Suppose the sale of marijuana is legalized in Florida,and the state decides to charge a tax of $50 per ounce on each sale,with the state claiming that retailers will bear the entire burden of this tax.Draw a graph illustrating the situation where retail outlets would bear the entire tax burden of $50 per ounce of marijuana.Explain what would need to be true about the demand for marijuana for retailers to bear the entire burden of this tax,and if this would likely occur if marijuana sales were legalized.

Accepted Answer

The answer of Article Summary
Monthly marijuana sales in Colorado topped...

Question 8

For the top 1 percent of income distribution,the share of federal individual income taxes paid by households in this group in 2015 was ________ percent.

Accepted Answer

According to the IRS, the top 1 percent of income earners paid 44 percent of federal individual income taxes in 2015.

Question 9

Suppose the equilibrium price and quantity of a 12-pack of Dr.Pepper are $5.00 and 10,000 12-packs,respectively,and the government decides to impose a $1.00 tax on every 12-pack of carbonated soft drinks.Draw two supply and demand graphs,one showing the excess burden of the tax when supply is less elastic and the other showing the excess burden of the tax when supply is more elastic.Identify the excess burden of the tax on each graph.On which graph is the excess burden the greatest?

Accepted Answer

The answer of Suppose the equilibrium price and quantity of...

Question 10

Between 1980 and 2014,income inequality in the United States has increased in part due to rapid technological change.How does technological change contribute to income inequality?

Accepted Answer

Technological change increases the demand for workers with high levels of skill, while reducing the demand for low-skilled workers. This leads to a decline in the relative wages of low-skilled workers compared to high-skilled ones. As a result, income inequality increases.

Question 11

Suppose the United States has a Gini coefficient of 0.4 and Sweden has a Gini coefficient of 0.25.Which of the following statements is true?

Accepted Answer

A lower Gini coefficient indicates a more equal distribution of income, so Sweden has a more equal distribution of income than the United States.

Question 12

A statistical tool used to measure inequality is

Accepted Answer

The Gini coefficient is a statistical measure of inequality in a population, ranging from 0 (perfect equality) to 1 (perfect inequality). It is commonly used to evaluate income or wealth distribution in a country or region. Choices A, C, and D are incorrect because they do not specifically measure inequality. The Lorenz curve is a graphical representation of income or wealth distribution, but the Gini coefficient is a numeric measure derived from the Lorenz curve. The absolute and relative poverty rates are measures of the percentage of the population living in poverty, but they do not distinguish the degree or distribution of poverty within the population.

Question 13

Figure 18-5 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-5.The highest 20 percent of households

Accepted Answer

The answer of  Figure 18-5 shows the Lorenz curve...

Question 14

For the top 1 percent of income distribution,the share of total income earned by households in this group was about ________ percent in 2015.

Accepted Answer

The answer of For the top 1 percent of income...

Question 15

Figure 18-5 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 18-5.The middle 20 percent of households

Accepted Answer

The answer of  Figure 18-5 shows the Lorenz curve...

Question 16

Figure 18-4 
-Refer to Figure 18-4.Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

Accepted Answer

The answer of Figure 18-4 
-Refer to Figure 18-4.Rank the...

Question 17

What is the United States government's formal definition of the poverty line?

Accepted Answer

The answer of What is the United States government's formal...

Question 18

Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-6.If area X = 2,060,area Y = 240,and area Z = 2,700,calculate the Gini coefficient for Islandia.

Accepted Answer

The answer of  Figure 18-6 shows the Lorenz curves...

Question 19

Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 18-6.If area X = 2,060,area Y = 240,and area Z= 2,700,calculate the Gini coefficient for Syldavia.

Accepted Answer

To calculate the Gini coefficient, we need to first find the total area under the line of perfect equality (the diagonal line) which is represented by the sum of areas X and Y (as Z is already above the line). 
Total area under diagonal = area X + area Y = 2,060 + 240 = 2,300
Then, we subtract the area under the Lorenz curve (represented by area Z) from the total area under the diagonal:
Area between diagonal and Lorenz curve = Total area under diagonal - Area under Lorenz curve = 2,300 - 2,700 = -400
Since the area can’t be negative, we use the absolute value of the area between the diagonal and the Lorenz curve, and divide this value by twice the total area under the diagonal:
Gini coefficient = |Area between diagonal and Lorenz curve| / (2 * Total area under diagonal) = 400 / (2 * 2,300) = 0.1739 ≈ 0.46 
Therefore, the best choice for the Gini coefficient for Syldavia is C) 0.46.

Question 20

The Gini coefficient is measured by

Accepted Answer

The answer of The Gini coefficient is measured by
...

Quiz 18: Public Choice, taxes, and the Distribution of Income

As the value of the Gini coefficient approaches one

What is the poverty rate?

As the value of the Gini coefficient approaches zero

Figure 18-6 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 18-6.Which country has the more unequal distribution of income?

Between 1980 and 2014,income inequality in the United States has increased in part due to expanding international trade.How does expanding international trade contribute to income inequality?

For the top 1 percent of income distribution,the share of federal individual income taxes paid by households in this group in 2015 was ________ percent.

Between 1980 and 2014,income inequality in the United States has increased in part due to rapid technological change.How does technological change contribute to income inequality?

Suppose the United States has a Gini coefficient of 0.4 and Sweden has a Gini coefficient of 0.25.Which of the following statements is true?

A statistical tool used to measure inequality is

Figure 18-5 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-5.The highest 20 percent of households

For the top 1 percent of income distribution,the share of total income earned by households in this group was about ________ percent in 2015.

Figure 18-5 shows the Lorenz curve for a hypothetical country. -Refer to Figure 18-5.The middle 20 percent of households

Figure 18-4 -Refer to Figure 18-4.Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

What is the United States government's formal definition of the poverty line?

Figure 18-6 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 18-6.If area X = 2,060,area Y = 240,and area Z = 2,700,calculate the Gini coefficient for Islandia.

Figure 18-6 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 18-6.If area X = 2,060,area Y = 240,and area Z= 2,700,calculate the Gini coefficient for Syldavia.

The Gini coefficient is measured by