Chapter 14R, Problem 22MCQ

To determine

The Lorenz curve for Equalville when everyone in the state earns the same income.

Answer to Problem 22MCQ

From the available options, the correct option is straight and upward-sloping.

Explanation of Solution

When every person in Equalville earns the same income, then the Lorenz curve would be straight and upward-sloping because there is equal distribution of income in the state. And, when the income distribution is more equal, the Lorenz curve would be a straight line at 45 degrees which slopes upward. Therefore, this curve would not deliver a downward, flat, or circular slope on the graph. Here, the correct option is d (straight and upward-sloping), and all options: a, b, c, and e are incorrect.

Economics Concept Introduction

Introduction: The Lorenz curve shows the graphical representation of inequality in income and inequality in wealth which was developed by Max Lorenz.