Person Judy Sandy Dee Shawntae Martha Income $40,000 $75,000 $85,000 $35,000 $11
ID: 1206359 • Letter: P
Question
Person
Judy
Sandy
Dee
Shawntae
Martha
Income
$40,000
$75,000
$85,000
$35,000
$110,000
The above table lists the incomes for the 5 people who live on the remote island nation of Richlandia.
1. Refer to Table 21.1. If Martha's income doubled to $220,000 while the incomes of the other four residents did not change, what would happen to the original median income on Richlandia?
A.It would increase by $22,000.
B.It would increase by $44,000.
C.It would not change.
D.It would double.
2.When we compare shares of income earned by U.S. households over the past 40 years, which of the following statements about the distribution of income is true?
A.The percentage of total income represented by each quintile has decreased.
B.Lowerincome households gained at the expense of higherincome households.
C.The largest gain in income percentage is in the top 5% of households.
D.The percentage of total income represented by each quintile has increased.
3.From 1970 to 2012, the Gini coefficient in the United States has
A.dramatically decreased.
B.remained relatively unchanged.
C.steadily increased.
D.more than doubled.
4.Income distribution in the United States over the past 40 years has become more equal.
True
False
5.Income inequality in the United States has increased in part due to technological change. How does technological change contribute to income inequality?
A.It is responsible for a majority of new products on the market, and these products are only affordable to higherincome households.
B.It reduces the cost of producing goods and therefore lowers the value of labor services.
C.It allows manufacturers to produce products with less labor, and this reduction in the demand for labor lowers wages at all skill levels.
D.It has created many higherincome jobs for skilled and trained workers, leaving the income of lessskilled workers relatively unchanged by comparison.
6.Income inequality in the United States has increased in part due to globalization. How does globalization contribute to incomeinequality?
A.It allows domestic firms to hirelowskilled workers anywhere in the world, putting U.S. workers in competition with foreign workers. This has caused the wages of lowskilled workers to fall relative to the wages of other workers.
B.It increases the demand for a wide variety of products which in turn increases prices beyond the reach of averageincome
households.
C.It allows producers to exploit workers and reduce the wages they are willing to pay those workers.
D.It reduces the cost of producing goods and therefore lowers the value of labor services.
7.Rachel, a large pineapple producer in Hawaii, lobbies Congress to limit imports of pineapples in order to be able to sell her pineapples at a higher price and greatly increase her income. This possible source of income inequality is due to
A.technology changes.
B.rent seeking.
C.globalization.
D.productivity differences.
8.If growing income inequality results from changes in technology that, as a whole, make society better off, this will
A.decrease the size of the economic pie because of the income inequality.
B.increase the size of the economic pie.
C.not change the size of the economic pie because the positive technology changes will be offset by the increases in income inequality.
D.result in complete income inequality as technology continues to change in the future.
9.The belief that having more of something makes you happier but in successively smaller increments is called
A.utilitarianism.
B.diminishing marginal utility.
C.the benefitsreceived principle.
D.transcendentalism.
10.The results of a survey conducted by Dan Ariely and Michael Norton found that Americans
A.show absolutely no preference for the amount of equality in wealth distribution in the nation.
B.have a preference for much less equality in wealth distribution than currently exists.
C.have a preference for roughly the amount equality in wealth distribution that currently exists.
D.have a preference for much greater equality in wealth distribution than currently exists.
11.In the United States, the highest quintile of income earners contribute ________ of all federal tax dollars received, and the lowest quintile of income earners contribute ________ of all federal tax dollars received
A.24%; 1.5%
B.20%; 20%
C.68.8%; 0.4%
D.29.4%; 11.5%
12.The question "Is the U.S tax system disproportionate enough?" is a ________ question, and the question "How would higher taxes make the rich behave?" is a ________ question.
A.normative; positive
B.positive; normative
C.positive; positive
D.normative; normative
Person
Judy
Sandy
Dee
Shawntae
Martha
Income
$40,000
$75,000
$85,000
$35,000
$110,000
Explanation / Answer
1. C.It would not change
2.D. The percentage of total income represented by each quintile has increased.
3. C.steadily increased.
4. False
5. D.It has created many higherincome jobs for skilled and trained workers, leaving the income of lessskilled workers relatively unchanged by comparison.
6. A.It allows domestic firms to hirelowskilled workers anywhere in the world, putting U.S. workers in competition with foreign workers. This has caused the wages of lowskilled workers to fall relative to the wages of other workers.
7. B.rent seeking.
8. B.increase the size of the economic pie.
9. B.diminishing marginal utility.
10 D.have a preference for much greater equality in wealth distribution than currently exists.
11. C.68.8%; 0.4%
12 A.normative; positive
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