Chapter 12 quiz

Assume a negative income tax that is structured according to the formula T = -$5,000 + 0.5Y, where T = tax liability and Y = earned income. The break-even income, when the family neither receives a tax payment nor pays any income tax, is a) $5,000. b) $7,500. c) $10,000. d) $12,500. e) $15,000.

10k

According to the Social Security Administration, the cost of a minimal nutritionally sound food plan is multiplied by what number to arrive at an income level used as the criteria for establishing the poverty line? a) 2 b) 3 c) 4 d) 5

3

Those at the lowest end of the income distribution are typically those who a. have large amounts of inherited wealth. b. are disabled, single, or lacking in employable skills. c. hold jobs requiring extensive training. d. have unique abilities or skills. e. manage to obtain monopoly power.

are disabled, single, or lacking in employable skills.

Since the end of World War II, the incidence of poverty as measured by the Social Security Administration's criterion has a) held steady at about 15 percent of the population. b) declined from about 50 to 25 percent of the population. c) increased from about 20 to 24 percent of the population. d) declined from about 30 to 12 percent of the population. e) increased from about 25 to 32 percent of the population.

declined from about 30 to 12 percent of the population

Economists criticize wage rates set on the basis of comparable worth because they a) promote efficiency at the expense of equity. b) ignore the effect of such important job characteristics as accountability, knowledge and skills, mental demands, and working conditions. c) generate surplus value that accrues to the owner rather than the employed. d) establish wage rates that do not reflect market demand and supply conditions. e) relate only to government employees and not all workers.

establish wage rates that do not reflect market demand and supply conditions

The argument that total consumer enjoyment from income increases if income is redistributed from the rich to the poor is based in part on the idea that an additional dollar given to a poor person provides him or her with more a) purchasing power than it provides a rich person. b) wants than it provides a rich person. c) employment than it provides a rich person. d) money than it provides a rich person. e) extra satisfaction than it provides a rich person.

extra satisfaction than it provides a rich person

Those who argue against income inequality say that a. inequality does not help the rich very much and may well reduce society's output. b. a more equal distribution of income raises the productivity of society because the rich do not want to work and the poor cannot. c. the poor are important patrons of new and high quality products that benefit the entire society. d. capital formation would be greater because the poor save more since they spend only on necessities, while the rich squander their incomes on conspicuous consumption of useless goods. e. income inequality leads to political inequality and reduced opportunity for advanced education and training.

income inequality leads to political inequality and reduced opportunity for advanced education and training

Families below the poverty line are most likely to be a) large (above seven persons), nonwhite, and headed by females. b) small (two to three persons), nonwhite, and headed by males. c) single male or female white persons. d) three- to four-person households located in the suburbs. e) uniformly distributed over all demographic groups.

large (above seven ppl), nonwhite and headed by females

Some argue that to determine whether a certain degree of income inequality is unfair, one must a) look at the justice of the process leading to the prevailing distribution. b) assume that perfect equality is the optimal condition. c) measure the comparable worth of high- and low-income households. d) determine whether it is correlated with the marginal utility of money. e) quantify the utility curve for individuals at similar income levels.

look at the justice of the process leading to the prevailing distribution

Which of the following government programs provides goods or services rather than cash payments to the poor? a) Aid to Families with Dependent Children b) Unemployment insurance c) Social Security d) Medicaid e) Old-age insurance

medicaid

A controversial element of the Social Security program is that a) participation is mandatory. b) the Social Security payments are withheld dollar for dollar. c) to collect any Social Security benefits, workers must retire at 65. d) it is run strictly like an ordinary insurance system which ties the level of benefits directly to the amount of an individual's contributions. e) the Social Security tax is progressive.

participation is mandetory

It is argued that measures taken to reduce inequality may decrease economic efficiency because a. poor people are inherently unproductive. b. it will lead to opportunities for poor people to gain advanced education and training. c. it is more efficient to produce the goods and services that rich people buy. d. it will increase saving at the expense of consumption and thereby lower output. e. people will have less incentive to produce if their incomes are unrelated to their productivity

people will have less incentive to produce if their incomes are unrelated to their productivity

Which of the following would be least likely to contribute to income inequality in the United States? a) Differences in the amount of education and training people receive b) Perfectly competitive, homogeneous resource markets c) Differences in inherited wealth d) The possession of unique abilities and skills e) Monopoly power

perfectly competitive homogeneous resource markets

A tax that takes a greater proportion of one's income as that income rises is called a) a progressive tax. b) a regressive tax. c) an income tax. d) an excise tax. e) a proportional tax.

progressive

Reducing or eliminating discrimination in labor markets would tend to a) lower all workers' wages. b) raise the prices of final goods and services. c) decrease the total demand for labor. d) decrease the demand for minority labor only. e) raise labor force productivity.

raise labor force productivity.

A tax structure under which an individual is taxed $1,000 per year regardless of income is a) unconstitutional. b) progressive. c) proportional. d) regressive. e) biased against higher-income groups.

regressive

A tax that takes a smaller proportion of one's income as that income rises is called a) a progressive tax. b) a regressive tax. c) an income tax. d) an excise tax. e) a proportional tax.

regressive

Measures taken to reduce inequality are likely to cause economic efficiency to a) increase indefinitely at an increasing rate. b) increase steadily. c) increase significantly at first and then level off. d) fall. e) remain unchanged.

remain unchanged

The negative income tax is a a. principle that argues that most income taxes reduce incentives to produce in a market system. b. system whereby families below a certain break-even level receive a government income tax payment. c. proposal to allow the automatic setting of income tax rates to negate the effects of a business cycle. d. form of unequal taxation that disproportionately hurts low-income families. e. tax on unearned income primarily designed to affect high-income families.

system where by families below a certain break-even level receive a gov income

To say that a tax is progressive means that a. the receipts from the tax are used for research and development. b. it is a tax on income. c. the tax affects the distribution of income. d. the poor pay a smaller proportion of their incomes for the tax than the rich. e. the tax rate declines with increasing income levels.

the poor pay a smaller proportion of thier incomes for the tax than the rich

A sales tax is generally considered to be regressive because a. the poor spend a greater percentage of their income on taxable items than the rich. b. sales tax rates rise as the price of the item rises. c. only necessities are subject to the sales tax. d. poor people pay a larger absolute amount of sales tax than the rich. e. poor people do not benefit from the services provided by sales tax revenues

the poor spend a greater percentage of their income on taxable items than the rich

Which of the following is an incorrect statement about the Social Security program? a) The Social Security tax is levied on wages up to an annual cap or maximum. b) The Social Security tax is regressive. c) The Social Security program is like an ordinary insurance program, in that the program's assets are sufficient to finance all the benefits promised. d) Participation in the program is mandatory. e) Monthly Social Security benefits depend on the number of years one has worked as well as one's average monthly earnings.

the social security program is like an ordinary insurance program, in that the program's assets are sufficient to finance all the benefits promised