Extreme efficiency comes at a cost of terrible inequality, while perfect equality comes at a cost of terrible inefficiency. However, there are cases where there is no efficiency cost to increased equality. Identify each scenario that is likely to increase equality with little or no efficiency cost. Using money and influence, rich donors successfully lobby for tax cuts for the highest 1% of earners. An extension of unemployment benefits leads to prospective workers taking more time off between jobs. After-school programs in Chicago reduce crime rates among teenagers. Atlanta's investment in public transportation leads to higher worker productivity, as fewer employees miss days or show up late for work.

Extreme efficiency comes at a cost of terrible inequality, while perfect equality comes at a cost of terrible inefficiency. However, there are cases where there is no efficiency cost to increased equality. Identify each scenario that is likely to increase equality with little or no efficiency cost. Using money and influence, rich donors successfully lobby for tax cuts for the highest 1% of earners. An extension of unemployment benefits leads to prospective workers taking more time off between jobs. After-school programs in Chicago reduce crime rates among teenagers. Atlanta's investment in public transportation leads to higher worker productivity, as fewer employees miss days or show up late for work.

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter28: Income Inequality And Poverty

Section: Chapter Questions

Problem 12CQ

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Suppose a government program guarantees $ 2,000 a month in income, even for those who do not work at all. However, if the recipient earns income by working, the benefit is reduced by 50 cents for each $1 earned. Which of the following statements is true? This program will redefine the proverty line. While the goal may be to reduce poverty, people rarely respond to incentives. This program will reduce the incentive to work significantly. The goal of this program is to increase the incentive to work, reducing the poverty trap.
Which of the following does not explain the rise in income inequality in the United States during the past four decades? An increase in minimum wages. Increased international trade with low-wage countries. Changes in technology. All of these answers have contributed to the rise in income inequality. A reduction in the demand for unskilled labor.
A country's Lorentz curve, y = L(x), provides us with insight into the country's income inequality. In particular, if the point (0; T00) is on the Lorentz curve, then this means that the bottom a% of households receive b% of the country's total income. In this context, the line y = x is called the perfect equality line (do you see why?). The Gini index of a country is defined to be the area of the region between the line y = x and the country's Lorentz curve y = L(x) on the interval 0, 1], and can be used to measure the income inequality of the country. Suppose there are two hypothetical countries A and B with Lorentz curves: LA(x) = x³, LB(x) = sin -x cos -x 2 (a) We can see that the point (0.5, 0.125) is on country A's Lorentz curve y = LA(x). From this, what can we conclude about the income distribution of the country A? (b) Compute the Gini indices of the countries A and B. Round your answers to the nearest 10th.
Which of the following is a reason for increased income inequality? Market forces lead to highly diverse marginal revenue products based on the goods and services provided by laborers. There is a decrease in the productive capacity of capital so that wages and salaries are instead paid to an improving labor force Taxes on earmings are collected each year and the amount per worker is based on a progressive calculation. Market wages are rising, and so the unemployed are incentivized to find a job. The structure of the labor union is reorganized such that their bargaining power is increased significantly.
Which of the following are true regarding the measurement of poverty? The poverty rate is the percentage of households whose earnings fall below the poverty line. The measurement of the poverty rate takes into account the effect of in-kind transfers. The measurement of the poverty rate does not take into account whether a households loss of income is transitory or permanent. The poverty line is an income amount below which a family is deemed to be poor.
Polly, Molly, and Dolly are all single mothers. They each can earn $10 per hour working for up to 2,000 hours per year. Their government runs a welfare system that gives income benefits of $5,000 per year for single mothers with no income. The welfare benefits are reduced by $1 for every $2 in earned income. Currently, the government also provides free health care for children of single mothers with less than $25,000 in income. Each mother values this benefit at $2,000 per year. Under this system, Polly works 200 hours per year, Molly works 1,025 hours per year, and Dolly works 1,500 hours, so only Polly receives welfare. b. Draw a representative indifference curve for each mother. Discuss how the welfare program changes the behavior of these three individuals. d. The government decides to remove the welfare lock by providing free low- quality public health care (Ho-$2,000) for everyone. If the individuals want to consumer health care more than Ho, they have to turn to private health…
Discuss the growing income inequality in the U.S. and the world with someone mature enough to have some perspective from experience about it. Ask them what they think about the widening gap between the rich and the rest of us in America, as our course materials speak of this problem. How has the economic trend for middle class Americans affected them? How as it affected you? Two examples of the marketization of society today that Sandel discusses are cash for grades and pay for getting around long lines. What, if anything, is wrong with these practices? Beyond what Sandel discusses, think of at least one social, personal, or relational good or value that you think would be negatively affected by marketization. And explain why.
Dina and Charles are married, under the age of 65, and have two children under the age of 18. Charles works full time and earns $19,000, while Dina works part time and earns $9,000. Thus, in total, their family income is $28,000. Are Charles and Dina living in poverty? O Yes O No Suppose that Charles divorces Dina and leaves the family without paying alimony or child support. Dina must now support her two children alone, so she begins working full time and earns a total of $18,000. Are Dina and her children living in poverty? O Yes O No Again, consider Dina, a single mother with two children under 18 who earns an annual income of $18,000. Suppose that Dina qualifies for a welfare program for single mothers that provides her with $4,000 in food assistance. After receiving welfare, is Dina's family living in poverty? O Yes O No
Actual Distribution of Wealth in the US Source: Adapted from the video "Wealth Inequality in America," 2012. Note: This document uses 2009 data. As of 2017, this inequality had only become greater. In this graph, the population of 300-plus million Americans is reduced to a representative group of 100 people. So, each person in this image represents 1% of the population. This group of 100 people has been lined up according to their wealth, poorest people on the left, wealthiest on the right. These 100 people have been shaded based on which 20% quintile they fall into. Then, the total wealth of the United States, which was roughly $54 trillion in 2009, was distributed among our 100 Americans. The poorest Americans don't even register, they are down to pocket change, and the middle class is barely distinguishable from the poor. 1% of America has 40% of all the nation's wealth, the bottom 80% only has 12% between them. The top 1% own half the country's, stocks, bonds and mutual funds. The…
Which of the following policies would be the most likely to have the effect of increasing income inequality. a) increasing the interest rate on bank loans b) switching from a regressive system to a progressive tax system. C) lowering taxes on income from interest earned on investment d) Increasing the nations per capita income e) Taking inheritance and using the revenue to provide college scholarship
The theory of distributive justice that I found to be the most convincing was the Utilitarianism theory. In current times there is a large amount of economic inequality. It states in the textbook, "The top 0.1 percent of American families owns 22 percent of the nation’s wealth–exactly the same share as the bottom 90 percent" (Shaw, 2017, p. 85). The Utilitarianism theory believes that there should be a greater equality of income. They believe that if there was a more equal distribution of income, then the happiness of that population would vastly increase. The textbook mentions that countries that have a more equal distribution of income tend to have lower rates of infant mortality, life expectancy, malnutrition, obesity, teenage pregnancy, economic insecurity, personal anxiety, and other measures, in comparison to countries that have a larger income inequality, such as the United States (Shaw, 2017, p. 92). It is even believed that income equality can promote economic growth (Shaw,…
Poverty is measured by the number of people who fall below a certain level of income—called the poverty line—that defines the income one needs for a basic standard of living. The official definition of the poverty line traces back to Group of answer choices A)The Great Depression B)Mollie Orshansky, whose idea was to define a poverty line based on the cost of a healthy diet. C)1953 and the ability to pay for housing and food. D)The 1965 cost of providing food, housing, and transportation.