Chapter 78, Problem 6MCQ

To determine

The Lorenz curve when every person received exactly the same income in an economy.

Answer to Problem 6MCQ

From the available options, the correct option is straight.

Explanation of Solution

When everyone in an economy had the same share of the money, the Lorenz curve would be a straight line at a 45-degree angle since there would be an equal distribution of income throughout the nation. Additionally, the Lorenz curve would be a straight line at a 45-degree angle when the income distribution is more evenly distributed.

Thus, neither a downhill nor an upward slope would be provided by this curve. And on the graph, it wouldn't be either vertical or horizontal.

The right answer in this case is option d (straight).

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.