ECON 1001: Chapter 23 (Income Inequality, Poverty, and Discrimination)

A quintile is ____ of the total number.

20% or 1/5

True or false: The diagonal line in a Lorenz curve indicates that the top 20% of households earn 80% of the nation's income.

False. Each point on the diagonal line indicates that a particular percentage of households receive the same percentage of income. 20% of all households receive 20%, 60% receive 60%, etc.

True or false: In the "distribution by quintiles" method of showing income inequality, the total number of households is divided into four equally sized groups.

False. Quintiles = five groups

To which of the following factors can the taste-for-discrimination model be applied?

Gender, age, and race.

A graph that depicts the income distribution in a nation is the ______. a) Lorenz Curve b) aggregate supply curve c) aggregate demand curve d) Laffer Curve

a) Lorenz Curve

Most of the reduction in income inequality in the United States is attributable to ______. a) transfer payments b) trade c) price controls d) taxes

a) transfer payments

Wealth is the accumulated ____ of a person over time.

assets

Statistical discrimination occurs when employers judge applicants based on the ___________.

average characteristics of the groups that they belong to

Based on the data in the table, what percentage of households had before-tax incomes of less than $25,000 in 2017? Multiple choice question. a) 33.3% b) 21.4% c) 2.5 % d) 54.7%

b) 21.4% 9.8 + 11.6

Overall, discrimination has the effect of ______. a) enhanced competition b) a diminished amount of total income c) reduced income inequality d) increased total output

b) a diminished amount of total income

Due to discrimination, labor supply will be artificially ______ in higher-pay occupations populated by preferred workers, ______ their wage rates and income. a) increased; raising b) reduced; raising c) reduced; reducing d) increased; reducing

b) reduced; raising bc they have less people now that they discriminated against others in the population, and they have to pay them more because of the discrimination coefficient

Since 1980, income distribution in the United States has ______.

become more unequal

Which of the following are tools by which the government redistributes income in the society? a) Protection of property rights b) Product safety testing c) Taxes d) Transfers

c) Taxes d) Transfers

The transfer of low-skilled jobs to ______ has placed downward pressure on the wages of less-skilled workers in the United States. a) recent college graduates b) high-skill workers c) developing countries d) wealthy nations

c) developing countries

The diagonal line in a Lorenz curve indicates a distribution of income where ______. a) only one-fifth of households receive the nation's total income b) the nation earns very little or no income c) every household has the same income d) the government collects all income

c) every household has the same income

Why is the taste-for-discrimination model considered a general theory? a) It provides proven solutions to the problem of discrimination. b) It is speculative and largely unproven. c) It incorporates techniques from a wide range of artistic and scientific disciplines. d) It can be applied to many different types of discrimination.

d) It can be applied to many different types of discrimination.

One tool that the government uses in order to redistribute income is a) importation. b) exports. c) pricing. d) taxation.

d) taxation.

Job opportunities and ______ are the most important factors alleviating poverty in the US. a) globalization b) high-speed Internet c) low marginal tax rates d) transfer payments

d) transfer payments

In the taste-for-discrimination model, an increase in prejudice will cause the ______ discriminated workers to ________.

demand for, decrease

The taste-for-discrimination model assumes that the "price" that a discriminator is willing to pay to avoid interactions with nonpreferred groups is ___ correlated to the degree of prejudice.

directly

The greater the wage difference paid by a prejudiced employer to preferred workers versus nonpreferred workers, the greater the _____ coefficient.

discrimination

The practice of according people inferior treatment on the basis of some factor such as race, gender or ethnicity is called ________.

discrimination

The Gini ratio is a numerical measure of the overall _____ of income in the economy.

dispertion/allocation/distribution

Average household income in the United States is among the ____ in the world.

highest

Since 1980, the ______ quintile of earners saw its share of income increase, while the ______ quintile of earners saw its share of income decrease.

highest, lowest

If discrimination confines certain groups to lower-paying jobs, then the supply of workers for those jobs will _____ (increase/decrease), and thus the wage rates in those jobs will _____ (increase/decrease).

increase, decrease

If there is a collective prejudice among employers against African-American workers, then the African-American-white wage ratio would be ______.

less than 1 *Why?* A wage ratio equal to 1 would indicate that African American and white workers were paid the same wages, which would not be true in a situation with collective prejudice against African American workers. zero is impossible A wage ratio greater than 1 would indicate that African American workers were paid more than white workers, which would not be true in a situation with collective prejudice against African American workers.

Compared to discriminating firms, nondiscriminating firms will end up having _____ labor costs.

lower

Nondiscriminating firms that hire the nonpreferred labor will be able to charge lower prices than the discriminating firms because the nondiscriminating firms will have ______.

lower labor costs

People are born with different _____ and physical abilities, contributing to income inequality.

mental

In choosing between two workers, one white and the other Hispanic, an employer who is prejudiced against Hispanics will be indifferent between the two if the wage rate of the Hispanic worker equals the wage rate of the white worker _______.

minus the discrimination coefficient

The movement of households from one income quintile to another over time is called income ______.

mobility

The taste-for-discrimination model assumes that prejudiced people experience _____ utility whenever they have to interact with those they are biased against.

negative

So-called "in-kind transfers" are also known as ____ transfers.

noncash

The practice of relegating certain groups of the population to less desirable, lower-paying jobs is called _______ segregation.

occupational

The taste-for-discrimination model views discrimination as resulting from a preference or taste for which the discriminator is willing to ____.

pay

Statistical discrimination tends to be ______.

persistent

With statistical discrimination, there could be discriminatory outcomes even in the absence of ______.

prejudice

The taste-for-discrimination model suggests that competition will _____ discrimination in the long run.

reduce

If an African American worker were to apply for a job with an extremely prejudiced employer who has a discrimination coefficient of infinity, the employer would ______.

refuse to hire the worker at any wage rate, even zero

Entrepreneurs are willing to take on ____ in the hope of earning a high income.

risk

The ____ discrimination model analyzes the effects of employers judging job applicants based on the average characteristics of the groups under which they fall.

statistical

An employer falsely assuming that a particular Hispanic worker has the characteristics typical of Hispanics is an example of ______.

statistical discrimination

The stock reflecting at a particular moment the financial and real assets a person has collected over time is called ____.

wealth

A prejudiced employer attaches a disutility of $5 to hiring African Americans. If the employer pays white employees $15 per hour, what wage rate would African American workers need to receive for the employer to have no preference between African American and white workers?

$10

Which of the following industries have recently experienced an increased demand for highly skilled workers? *Health care *Business consulting *Manufacturing *Computer software

*Health care *Business consulting *Computer software

A point on the diagonal line of a _____ curve indicates that thirty percent of households earn thirty percent of the nation's income.

Lorenz

The _____ curve shows the percent of a nation's income that is earned by a given percent of the nation's households.

Lorenz

Which discrimination model views discrimination through the lens of the emotion-free language of demand theory?

Taste-for-discrimination model

Which model views discrimination as resulting from a certain preference for which the discriminator is willing to pay?

Taste-for-discrimination model.

_____ payments account for most of the reduction in income inequality in the United States.

Transfer

True or false: Average household income in the United States is higher than in most other countries in the world.

True.

Based on the data in the table, to which category of income distribution did the largest percentage of households belong in 2017? a) $100,000 and above b) $50,000-$74,999 c) $25,000-$34,999 d) Under $15,000

a) $100,000 and above

Which two of the following factors have been most important in alleviating poverty in the United States? a) Job opportunities b) Transfer payments c) International trade d) Agricultural productivity

a) Job opportunities b) Transfer payments

An employer who is prejudiced against women will have a perceived cost of employing a female worker determined by which of the following formulas? a) The worker's wage rate plus the employer's discrimination coefficient. b) The wage rate paid to female employees divided by the wage rate paid to male employees. c) The wage rate paid to male employees minus the employer's discrimination coefficient. d) The wage rate paid to male employees minus the wage rate paid to female employees.

a) The worker's wage rate plus the employer's discrimination coefficient. PERCEIVED COST IS THE TOTAL!

The discrimination coefficient reflects the _____ that a prejudiced person experiences when interacting with nonpreferred groups.

disutility

Which of the following are associated with "rigging the market" to unfairly increase one's income? *Market forces of supply and demand setting prices on goods and services *Labor union's limiting the supply of their services *Firms using monopoly power to artificially increase profits *Occupational licensing legislation favoring licensed groups

*Labor union's limiting the supply of their services *Firms using monopoly power to artificially increase profits *Occupational licensing legislation favoring licensed groups

True or false: Employers will select candidates with more education for on-the-job training.

True.

True or false: Some abilities are inherited and some are developed.

True.

True or false: The diagonal line in a Lorenz curve represents a case where any given percentage of households in a nation receives that same percentage of the nation's total income.

True.

Subsidized school lunches, housing subsidies, and other similar programs where the government provides some households with specific goods or services rather than cash are called ______. a) in-kind transfers b) tariffs c) cash transfers d) excise taxes

a) in-kind transfers otherwise known as noncash transfers

A greater demand for high-skilled well-educated workers has contributed to growing income inequality because a) the supply of such workers has not kept pace with demand. b) the supply of such workers has outpaced the demand for them. c) these workers tend to belong to strong labor unions.

a) the supply of such workers has not kept pace with demand.

Income mobility refers to the movement over time of ______. a) households from one job location to another b) households from one income quintile to another c) nations from one income quintile to another d) households from one income source to another

b) households from one income quintile to another

The market system permits a high degree of income inequality because a) it sets product prices based on supply and demand forces. b) it rewards people based on their contributions to society's output. c) it taxes income and wealth. d) it features many buyers and sellers.

b) it rewards people based on their contributions to society's output.

______ tends to be permissive of a high degree of income inequality. a) A monopoly market b) A free-trade zone c) The market system d) Perfect competition

c) The market system

One demographic change that contributed to the relatively faster increase in incomes among the highest income quintiles is the ______. a) increased number of children born to high-earning households b) entrance of large numbers of highly skilled baby boomers into the workforce during the 1970s and 1980s c) growing tendency for men and women with high earnings potential to marry each other d) huge decline in the number of households headed by single or divorced women

c) growing tendency for men and women with high earnings potential to marry each other

Workers who prefer ______ work relative to ______ work tend to earn more than workers with the opposite preference. a) market; occupational b) occupational; market c) market; household d) household; market

c) market; household

The Gini ratio is a numerical measure of the a) overall total income in the economy. b) average household income in the economy. c) overall dispersion of income.

c) overall dispersion of income.

Which employee is most likely to receive advanced on-the-job training? a) Melanie, who did not complete high school b) Ahmed, who has an undergraduate college degree c) Jonah, who has a high school diploma d) Kimberly, who has an advanced college degree

d) Kimberly, who has an advanced college degree

In which situation would an employer who is prejudiced against Hispanic workers prefer to hire a Hispanic worker over a white worker? a) When the employer's discrimination coefficient is infinity b) When the value of the employer's discrimination coefficient exceeds the wage rate paid to white workers c) When the wages paid to white workers and Hispanic workers are equal before taking into account the discrimination coefficient d) When the difference in wages between white and Hispanic workers exceeds the value of the employer's discrimination coefficient

d) When the difference in wages between white and Hispanic workers exceeds the value of the employer's discrimination coefficient

International trade has contributed to the growing income inequality in the United States because ______. a) Executives are entitled to collect all of the revenues from international sales b) International trade deals include wage limits for lower-skilled workers c) Consumer demand has declined significantly as cheaper, poorly made products have flooded the domestic market d) competition from imports reduced the demand for less-skilled (but well-paid) workers in certain industries.

d) competition from imports reduced the demand for less-skilled (but well-paid) workers in certain industries.