Chapter 78, Problem 3MCQ

To determine

The Lorenz curve when one person received all of the income in an economy.

Answer to Problem 3MCQ

From the available options, the correct option is to lie along the horizontal axis except on the right side of the graph.

Explanation of Solution

Because there is no cap on a person's earning potential in the country, the Lorenz curve would be located fairly far to the right of the graph at the horizontal axis if one individual received all of the income in the economy. Thus, neither a downhill nor an upward slope would be provided by this curve. Additionally, it wouldn't be vertical on the left side of the graph or grow steadily.

Therefore, option e is the right one (lie along the horizontal axis except on the right side of the graph) and all other options 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.