Deck 6: Income Redistribution

Question 1

In-kind transfers are more satisfactory than lump-sum cash from the recipient's point of view.

A)True
B)False
C)Uncertain

Answer 1

False

Question 2

What is Canada's official measure of the poverty line?

A)The low income cut-off
B)Welfare recipients
C)The low income rate
D)There is no official measure of poverty.

Answer 2

There is no official measure of poverty.

Question 3

An in-kind transfer may be preferred to a lump-sum cash transfer because

A)it is cheaper to administer in-kind transfers.
B)it is difficult for the government to distinguish who is in need.
C)the government knows individuals' needs.
D)cash transfers are not valued as much as in-kind transfers.

Answer 3

it is difficult for the government to distinguish who is in need.

Question 4

The percentage of children living in low income in Canada is that of the elderly.

A)greater than
B)not comparable to
C)equal to
D)less than

Question 5

The income share of the top 1 percent in Canada has over the last 35 years.

A)remained the same
B)not been accurately measured
C)decreased
D)increased

Question 6

If individuals are altruistic then their utility depends only on their own income.

A)True
B)False
C)Uncertain

Question 7

Ethics play a role in income redistribution.

A)True
B)False
C)Uncertain

Question 8

Taking into account the utility of all persons in society is referred to as

A)an equalizing social welfare function.
B)a Pareto equilibrium.
C)a utilitarian social welfare function.
D)an in-kind transfer.

Question 9

The Lorenz curve

A)indicates the distribution of income.
B)may coincide with the 45º line.
C)traces out the cumulative income shares.
D)all of the these answers are correct.

Question 10

Market income should always be used when analyzing income, income inequality, or poverty.

A)True
B)False
C)Uncertain

Question 11

The low income rate in Canada has since 1980.

A)increased a great deal but then declined
B)increased slightly
C)stayed the same
D)decreased

Question 12

Some important sources of income are excluded from the data.

A)True
B)False
C)Uncertain

Question 13

In a public goods context, it is difficult to measure their impact on real income because

A)people do not reveal how they value public goods.
B)public goods are generally free to the public.
C)they make up a small percentage of total GDP.
D)inflation decreases the value of the good.

Question 14

Social welfare functions require that a society has many people living in it.

A)True
B)False
C)Uncertain

Question 15

Giving poor people food instead of cash for food

A)will benefit some more than others, depending on their utility function.
B)is an in-kind transfer.
C)is politically popular.
D)all of these answers are correct.

Question 16

Giving in-kind transfers will ensure that people get proper amounts of nutrition.

A)True
B)False
C)Uncertain

Question 17

Maximizing the utility of the person with the minimum utility is known as

A)the minimax criterion.
B)the John Stuart Mill Rule.
C)the maximin criterion.
D)utilitarianism.

Question 18

An in-kind transfer is a

A)system of clearing cheques by local banks.
B)transfer made by people to be kind to others.
C)transfer of goods and services instead of cash.
D)transfer of wealth.

Question 19

The proportion of elderly who are poor has since 1980.

A)increased
B)remained the same
C)not been measured
D)decreased

Question 20

A notion that supports the idea that some items should be distributed equally to all is known as

A)Pareto efficiency.
B)poverty gap reduction.
C)commodity egalitarianism.
D)paternalism.

Question 21

Suppose Lefty has utility characterized by the equation: Ul = 3I2/5, where I is income. In addition, Righty has utility characterized by the equation: Ur = 4I2/5, where I is income.
(A)If each had $100,000, which one would have the higher level of utility?
(B)Illustrate Lefty's and Right's utility functions.
(C)What equal amount of income could we give to both that would also give them the same level of utility?

Question 22

If income is equally distributed across the population, the Gini coefficient equals

A)one.
B)infinity.
C)zero.
D)two.

Question 23

A redistribution is Pareto efficient if no one is made worse off afterward.

A)True
B)False
C)Uncertain

Question 24

Suppose that in a certain society $10,000 is the official cut-off of income for the poor. This means th any person making less than $10,000 is considered poor. Suppose further that there are three people i this society: Randy, Marlon, and Tito, with incomes of $9,900, $9,900, and $5,000, respectively.

A)How many people are in poverty?
B)How much income would it take, on average, to lift every poor person out of poverty?
C)What if some policy caused $200 to be taken from Tito and given to Randy. How many people ar in poverty now? How much income would it take, on average, to lift every poor person out of poverty?

Question 25

An additive social welfare function would

A)sum all individual utilities.
B)maximize the utility of the person with the minimum utility.
C)subtract out the utility functions of all people who are unemployed.
D)add the incomes of the lowest ten percent of income earners.

Question 26

If the least wealthy person in a society has millions of dollars, should we still consider that person poor?