Question 1

Critics of income redistribution programs cite efficiency losses as a cost of redistribution.

Accepted Answer

Critics argue that income redistribution can lead to inefficiencies in the economy by distorting market incentives and reducing the incentive for individuals to work and invest, leading to a potential decrease in overall economic productivity and growth.

Question 2

One study concludes that the rise in income inequality between 1973 and 2003 is explained by an older population that had increased experience and education.

Accepted Answer

The study concludes that the rise in income inequality is explained by an older population with increased experience and education, which is a true statement.

Question 3

Generally speaking, income inequality is definitively explained by the fact that generation after generation is essentially "trapped" in a particular income quintile.

Accepted Answer

Income mobility exists, allowing individuals or families to move between different income quintiles over time. Factors such as education, economic policies, and individual choices can influence these movements, indicating that being "trapped" in a particular income quintile is not a definitive explanation for income inequality.

Question 4

Answer the next three questions based upon the following diagram:
 
-The return to capital will equal:

Accepted Answer

The answer of Answer the next three questions based upon...

Question 5

Answer the next three questions based upon the following diagram:
 
-The return to labor will equal:

Accepted Answer

The return to labor is typically represented by the wage or income earned from labor. In economic models, this is often depicted as a function of the labor input and other factors of production. The correct choice, C (0ACD), suggests a combination of factors including labor (0A) and other elements (CD) that contribute to the return to labor. This reflects the understanding that labor income is determined by a mix of labor input and the productivity factors associated with it.

Question 6

Answer the next three questions based upon the following diagram:
 
-The diagram provides information that is particularly relevant to:

Accepted Answer

The phrase "distribution of income by factor shares" directly relates to how income is generated and distributed across different factors of production (such as labor, capital, etc.), which is a common type of economic analysis. This contrasts with personal income, wealth distribution, population distribution, and agronomy, which focus on different aspects of economic and social data.

Question 7

Which of the following is not true?

Accepted Answer

The statement that the lowest income category by marital status is "single male (never married)" is not true. Typically, "single female (never married)" households tend to have lower average incomes compared to their male counterparts, reflecting broader gender income disparities.

Question 8

A comparison of the Gini coefficients for the United States with that of most other industrial nations indicates:

Accepted Answer

The Gini coefficient is a measure of income inequality, with 0 representing perfect equality and 1 representing perfect inequality. Comparisons of Gini coefficients across countries show that the United States has somewhat greater income inequality than most other industrialized nations.

Question 9

Looking at the disposition of national income in the United States, which of the following is not true?

Accepted Answer

The share of income obtained from employee compensation is not the lowest of the total; in fact, it typically represents the largest portion of national income in the United States.

Question 10

Which of the following generalizations is true?

Accepted Answer

The lowest quintile of income recipients typically accounts for less than 5 percent of total family income in the United States, reflecting significant income inequality.

Question 11

The Lorenz Curve is an analytic tool principally used for:

Accepted Answer

The Lorenz Curve is primarily used to examine the distribution of income within a population, illustrating inequalities in income distribution.

Question 12

The efficiency versus equity tradeoff refers to:

Accepted Answer

The efficiency versus equity tradeoff suggests that achieving greater income equality often necessitates a compromise in economic efficiency, as resources may not be allocated in the most productive manner when redistributing wealth to achieve equity.

Question 13

Answer the next six questions based upon the following diagram.
 
-The diagonal line 0A is:

Accepted Answer

The diagonal line 0A, often referred to in the context of a Lorenz curve, represents the line of perfect equality. This means that if the wealth distribution of a society is represented by this line, then everyone has exactly the same income or wealth, indicating no inequality.

Question 14

Answer the next six questions based upon the following diagram.
 
-Which curve shows the greatest inequality?

Accepted Answer

Curve 0FGA represents the greatest inequality because it is the furthest from the line of equality (0A), indicating a larger disparity in the distribution of whatever is being measured (e.g., income, wealth).

Question 15

Answer the next six questions based upon the following diagram.
 
-If the actual distribution of income is represented by curve 0BCA, then the Gini ratio or coefficient can be stated as:

Accepted Answer

The Gini coefficient is a measure of inequality of a distribution. It is defined as the ratio of the area that lies between the line of equality and the Lorenz curve (area A in many representations) over the total area under the line of equality (areas A and B together). Therefore, the correct formula for the Gini coefficient in this context is $\frac{m}{m + n + p + r}$, which corresponds to choice A.

Question 16

Answer the next six questions based upon the following diagram.
 
-If there is perfect equality in the distribution of income, the Gini coefficient can be stated as:

Accepted Answer

The answer of Answer the next six questions based upon...

Question 17

Answer the next six questions based upon the following diagram.
 
-Which curve shows the perfect equality?

Accepted Answer

The curve 0A represents perfect equality, as it is a straight line at a 45-degree angle from the origin, indicating that income or wealth is distributed equally among all individuals.

Question 18

Answer the next six questions based upon the following diagram.
 
-Which point represents the greatest percentage of families in possession of the smallest percentage of income?

Accepted Answer

The point that represents the greatest percentage of families in possession of the smallest percentage of income is typically found at the point where the curve on a Lorenz curve is furthest from the line of perfect equality. Point F, on a typical Lorenz curve, represents this scenario, indicating the highest level of income inequality among the given options.

Question 19

The top 10 percent of wealth holders have:

Accepted Answer

The top 10 percent of wealth holders indeed control a disproportionate amount of assets, often cited as around 70 percent or more, highlighting significant wealth inequality.

Question 20

Which of the following is not a plausible reason for differences in income?

Accepted Answer

EPA mileage standards for automobiles are regulations that aim to improve fuel efficiency and reduce emissions from vehicles. They do not directly affect individual income levels, unlike the other options which can influence personal wealth through luck, property rights, or labor market conditions.

Quiz 9: The Distribution of Income: Dividing the Economic Pie

Critics of income redistribution programs cite efficiency losses as a cost of redistribution.

One study concludes that the rise in income inequality between 1973 and 2003 is explained by an older population that had increased experience and education.

Generally speaking, income inequality is definitively explained by the fact that generation after generation is essentially "trapped" in a particular income quintile.

Answer the next three questions based upon the following diagram: -The return to capital will equal:

Answer the next three questions based upon the following diagram: -The return to labor will equal:

Answer the next three questions based upon the following diagram: -The diagram provides information that is particularly relevant to:

Which of the following is not true?

A comparison of the Gini coefficients for the United States with that of most other industrial nations indicates:

Looking at the disposition of national income in the United States, which of the following is not true?

Which of the following generalizations is true?

The Lorenz Curve is an analytic tool principally used for:

The efficiency versus equity tradeoff refers to:

Answer the next six questions based upon the following diagram. -The diagonal line 0A is:

Answer the next six questions based upon the following diagram. -Which curve shows the greatest inequality?

Answer the next six questions based upon the following diagram. -If the actual distribution of income is represented by curve 0BCA, then the Gini ratio or coefficient can be stated as:

Answer the next six questions based upon the following diagram. -If there is perfect equality in the distribution of income, the Gini coefficient can be stated as:

Answer the next six questions based upon the following diagram. -Which curve shows the perfect equality?

Answer the next six questions based upon the following diagram. -Which point represents the greatest percentage of families in possession of the smallest percentage of income?

The top 10 percent of wealth holders have:

Which of the following is not a plausible reason for differences in income?