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Liberalism aims to raise the welfare of the worst-off person in society. This rule is called the


A) minimax regret criterion.
B) conservative approach.
C) Nozick criterion.
D) maximin criterion.

E) A) and B)
F) A) and C)

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The poverty line in the country of Dismal is $20,000. The distribution of income for Dismal is as follows: Number of Families Income The poverty line in the country of Dismal is $20,000. The distribution of income for Dismal is as follows: Number of Families Income 1,000 less than $10,000 2,000 between $10,000 and $20,000 2,000 between $20,000 and $30,000 800 between $30,000 and $40,000 200 over $40,000 The poverty rate in Dismal is A) 16.7 percent. B) 33.3 percent. C) 50 percent. D) 83.3 percent. The poverty line in the country of Dismal is $20,000. The distribution of income for Dismal is as follows: Number of Families Income 1,000 less than $10,000 2,000 between $10,000 and $20,000 2,000 between $20,000 and $30,000 800 between $30,000 and $40,000 200 over $40,000 The poverty rate in Dismal is A) 16.7 percent. B) 33.3 percent. C) 50 percent. D) 83.3 percent. 1,000 less than $10,000 2,000 between $10,000 and $20,000 2,000 between $20,000 and $30,000 800 between $30,000 and $40,000 200 over $40,000 The poverty line in the country of Dismal is $20,000. The distribution of income for Dismal is as follows: Number of Families Income 1,000 less than $10,000 2,000 between $10,000 and $20,000 2,000 between $20,000 and $30,000 800 between $30,000 and $40,000 200 over $40,000 The poverty rate in Dismal is A) 16.7 percent. B) 33.3 percent. C) 50 percent. D) 83.3 percent. The poverty rate in Dismal is


A) 16.7 percent.
B) 33.3 percent.
C) 50 percent.
D) 83.3 percent.

E) B) and C)
F) A) and D)

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Which of the following is not an example of in-kind transfers?


A) food stamps
B) Medicaid
C) the Earned Income Tax Credit
D) housing vouchers

E) C) and D)
F) B) and D)

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Table 20-3 The Distribution of Income in Edgerton Table 20-3 The Distribution of Income in Edgerton -Refer to Table 20-3. According to the table, what percent of families in Edgerton have income levels at or above $76,000? A) 80 percent B) 60 percent C) 50 percent D) 40 percent -Refer to Table 20-3. According to the table, what percent of families in Edgerton have income levels at or above $76,000?


A) 80 percent
B) 60 percent
C) 50 percent
D) 40 percent

E) A) and D)
F) None of the above

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Based on U.S. income data from 2011, the top fifth of all families received


A) about 3.8 percent more than the bottom fifth.
B) about 49 percent more than the bottom fifth.
C) approximately 5 times more income than the bottom fifth.
D) more than 12 times more income than the bottom fifth.

E) A) and C)
F) B) and C)

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What is one argument made by proponents of in-kind transfers over cash payments to the needy?

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In-kind payments ens...

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Table 20-7 Table 20-7 -Refer to Table 20-7. Which of the following is the best overall conclusion to draw from the data? A) The most alarming statistic is the lowering of the top income level that defines the bottom fifth of the income distribution because this indicates that the income distribution is becoming more unequal. B) The greatest cause for concern is the increase in the minimum income level that defines the top fifth of the income distribution because this indicates that the rich have become richer. C) The income distribution has been relatively unchanged from 2001 to 2011. D) Both a and b are correct. -Refer to Table 20-7. Which of the following is the best overall conclusion to draw from the data?


A) The most alarming statistic is the lowering of the top income level that defines the bottom fifth of the income distribution because this indicates that the income distribution is becoming more unequal.
B) The greatest cause for concern is the increase in the minimum income level that defines the top fifth of the income distribution because this indicates that the rich have become richer.
C) The income distribution has been relatively unchanged from 2001 to 2011.
D) Both a and b are correct.

E) A) and D)
F) A) and B)

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Table 20-4 Table 20-4 Source: U.S. Bureau of Census -Refer to Table 20-4. In 2011, the top fifth of families have A) almost 13 times as much income as the bottom fifth of families. B) 28.2% more income than the bottom fifth of families. C) 50.3% more income than the bottom fifth of families. D) 45.1% more income than the bottom fifth of families. Source: U.S. Bureau of Census -Refer to Table 20-4. In 2011, the top fifth of families have


A) almost 13 times as much income as the bottom fifth of families.
B) 28.2% more income than the bottom fifth of families.
C) 50.3% more income than the bottom fifth of families.
D) 45.1% more income than the bottom fifth of families.

E) None of the above
F) B) and C)

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Suppose the government used the following formula to compute a family's tax liability: Taxes owed = 28% of income - $8,000. How much would a family have to earn to owe $0 in taxes?


A) $8,000
B) $16,283
C) $28,571
D) $30,694

E) All of the above
F) B) and D)

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In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,


A) the costs of welfare programs will exceed the benefits.
B) it should not try to reach complete equality in income.
C) income equality will be the best policy option.
D) equality of economic opportunity will reduce society's utility.

E) B) and D)
F) All of the above

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The Supplemental Security Income (SSI) program focuses on the poor who are sick or disabled.

A) True
B) False

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The distribution of income for Inequalia is as follows: Number of Families Income The distribution of income for Inequalia is as follows: Number of Families Income 200 less than $5,000 300 between $5,000 and $10,000 500 between $10,000 and $15,000 700 between $15,000 and $20,000 300 over $20,000 If the poverty rate in Inequalia is 25 percent, what is the poverty line in Inequalia? A) $5,000 B) $10,000 C) $15,000 D) $20,000 The distribution of income for Inequalia is as follows: Number of Families Income 200 less than $5,000 300 between $5,000 and $10,000 500 between $10,000 and $15,000 700 between $15,000 and $20,000 300 over $20,000 If the poverty rate in Inequalia is 25 percent, what is the poverty line in Inequalia? A) $5,000 B) $10,000 C) $15,000 D) $20,000 200 less than $5,000 300 between $5,000 and $10,000 500 between $10,000 and $15,000 700 between $15,000 and $20,000 300 over $20,000 The distribution of income for Inequalia is as follows: Number of Families Income 200 less than $5,000 300 between $5,000 and $10,000 500 between $10,000 and $15,000 700 between $15,000 and $20,000 300 over $20,000 If the poverty rate in Inequalia is 25 percent, what is the poverty line in Inequalia? A) $5,000 B) $10,000 C) $15,000 D) $20,000 If the poverty rate in Inequalia is 25 percent, what is the poverty line in Inequalia?


A) $5,000
B) $10,000
C) $15,000
D) $20,000

E) A) and D)
F) All of the above

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Which of the following statements is not correct?


A) The poverty line is an absolute level of income set by the federal government below which a family is considered to be in poverty.
B) The poverty line is approximately equal to three times the cost of providing an adequate diet.
C) The poverty line is adjusted annually to reflect changes in price levels.
D) The poverty line is adjusted semiannually to reflect changes in fuel prices.

E) A) and B)
F) None of the above

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Assume that the government proposes a negative income tax that calculates the taxes owed as follows: taxes owed equal 30% of income less $12,000. A family that earns an income of $40,000 will


A) neither pay taxes nor receive an income subsidy.
B) receive an income subsidy of $3,600.
C) pay $3,600 in taxes.
D) pay $12,000 in taxes.

E) A) and B)
F) B) and C)

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A negative income tax system is designed to


A) provide in-kind benefits to the poor.
B) provide a minimum income to the poor.
C) reduce taxes on the rich when their incomes surpass the maximum income tax bracket.
D) subsidize food consumption in poor families.

E) A) and B)
F) A) and D)

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Scenario 20-7 Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax system in which Taxes owed = (1/4 of income) - $15,000. -Refer to Scenario 20-7. Zooey's brother Zander owes $10,000 in taxes. How much does he earn?

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Poverty is found to be correlated with


A) age and race but not family composition.
B) race only.
C) race and family composition but not age.
D) age, race, and family composition.

E) C) and D)
F) None of the above

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Which of the following is not a characteristic of the Earned Income Tax Credit (EITC) ?


A) It does not discourage recipients from working.
B) It is less distortionary than other anti-poverty programs.
C) It helps the disabled who cannot work.
D) It applies only to the working poor.

E) B) and C)
F) A) and D)

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Which of the following statements is not correct?


A) Libertarians are opposed to redistributing income.
B) Critics of the welfare system argue that it breaks up families.
C) One of the problems with measuring income inequality is valuing in-kind transfers.
D) Utilitarians believe that the government should punish crimes but should not redistribute income.

E) C) and D)
F) All of the above

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The Hicks family owns a blueberry farm in Maine. The Ward family owns a blueberry farm in Massachusetts. A drought in Massachusetts destroys half of the Ward family's harvest for one year. For the Ward family, their


A) transitory income for the year of the drought likely exceeds their permanent income.
B) permanent income likely exceeds their transitory income for the year of the drought.
C) transitory income likely will be affected but the permanent income of the Hicks family will increase.
D) permanent income likely will be affected but the permanent income of the Hicks family will not be affected.

E) A) and B)
F) None of the above

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