Poverty Inequality And Discrimination Exam Prep Ch.20

Indicate whether the statement is true or false.

1. Discrimination exists when a man and a woman with the same levels of education earn different incomes.

2. In 2017, the U.S. median income for a family of four was about $61,000.

3. The U.S. distribution of income was more unequal in 1990 and 1980 than in 1970.

4. Nondiscriminatory firms hiring in the market place have a cost advantage.

5. The “War on Poverty” was declared by President Ronald Reagan in 1982.

6. There are several reasons why incomes are unequal, including differences in luck, experience, and schooling.

7. The U.S. income tax system is progressive.

8. Programs that reduce the incentive to work make income redistribution inefficient.

9. Affirmative action laws require employers to search for qualified minority applicants but not to necessarily give them jobs.

10. A minority candidate may not have the same chances as a white candidate for a job simply based on an employer’s misconceptions about minorities.

11. Falling below a minimum standard of living illustrates the concept of absolute poverty.

12. TANF sets a lifetime cap for benefits at 10 years.

13. Affirmative action laws require employers to hire specified numbers of minorities.

14. The highest-income fifth of the U.S. population earns more than 50 percent of all income.

15. Inheritance taxes tend to increase income inequality in the long run.

16. The concept of absolute poverty states that anyone who falls too far behind the average income should be considered poor.

17. One benefit of a negative income tax is that it would increase work incentives.

18. Lyndon Johnson’s “War on Poverty” started in the 1980s.

19. The negative income tax has little support among economists because it distorts incentives to work.

20. Tax loopholes increase the progressivity of the federal income tax.

21. In 2017, the poverty line for a family of four was about $42,000.

22. The relative concept of poverty is based on how far behind average income a particular family gets.

23. If a female supervisor is discriminated against by one of her workers who refuses to cooperate, she may earn lower wages.

24. In labor markets, risk taking accounts for some income differences.

25. The Earned Income Tax Credit (EITC) is a more efficient means to redistribute income to people below the poverty line than direct cash transfers.

26. Taken as a whole, antipoverty programs may actually put a poor family in a position in which the family becomes worse off if its earnings rise.

27. An employer who refuses to hire women because of the chance they may quit for childbearing purposes is engaging in statistical discrimination.

28. In 1962, Michael Harrington argued in The Other America that there was chronic, severe poverty in America.

29. The lowest-income fifth of the U.S. population ordinarily earns about 20 percent of the income.

30. A market system tends to create inequality.

31. The concept of poverty is culturally determined, and hence people are defined as “poor” in relation to others.

32. The relative concept of poverty means that poverty will never be eliminated.

33. Compared to most other industrialized nations, the United States has greater income inequality.

34. Large income differences will be eradicated if the market mechanism is working well.

35. Two policies to combat discrimination are affirmative action and right-to-work laws.

36. Poverty is defined in two ways: the absolute concept of poverty and the relative concept of poverty.

37. In a market economy, incomes would be very equal if there was no discrimination.

38. TANF compels welfare recipients to go to work after a period of two years.

39. For most welfare recipients, the negative income tax plan would increase incentives to work.

40. Prejudice leads, inevitably, to economic discrimination.

41. Compensating wage differentials explain some income differences.

42. In their 1994 book, The Bell Curve, Murray and Herrnstein presented evidence that IQ is an important determinant of economic success.

43. The United States has less income inequality than most other developed countries.

44. In the United States, the incidence of poverty has declined since the 1970s.

45. Actual experiments show that negative income taxes destroy work incentives.

46. The total amount of income in a society is independent of how income is distributed.

47. Discrimination can come from many groups of people, including employers and fellow employees.

48. Economic discrimination occurs when two equal factors of production are paid differently.

49. Competitive forces will reduce the effects of employers’ discrimination over time.

50. Economic discrimination occurs when equivalent factors of production receive different payments for equal contributions to output.

51. If two individuals have identical schooling, their incomes will be equal.

52. On net, the U.S. tax system is highly progressive.

53. It is not optimal to have equal incomes.

Indicate the answer choice that best completes the statement or answers the question.

54. Japanese employers tend to hire employees right out of college and train them for a lifetime job with the company. Over time they found that women often, but not always, married after a few years and left the company so they were not good training investments. Based on this experience, and despite the exceptions, firms stopped hiring any women for jobs that require substantial training. This practice is called

55. In 2017, the poverty line for a family of four was approximately

56. Affirmative action

57. A man may be preferred to a woman by an employer who will make a substantial investment in the training of the employee because

58. The public assistance program that economists believe can promote economic equality at the least cost in economic efficiency is

59. Under a relative concept of poverty, poverty

60. Generally speaking, markets do a(n) ____ job of reconciling the demands of fairness and efficiency.

61. The difference between the earnings of construction workers who work on bridges and skyscrapers and those who work on highways is probably due to

62. Consider the economy described by the income distribution in Table 21-1. From this table, we can conclude that the poorest 60 percent of the population earns

63. The fundamental criticism from the efficiency perspective of AFDC and other antipoverty programs is that

Table 21-1

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64. Consider the economy described by the income distribution in Table 21-1. From this table, we can conclude that the

65. The poor are those who fall too far behind the average income. This refers to the ____ definition of poverty.

66. The controversy over affirmative action illustrates the

67. It has been found that

68. In the negative income tax framework, a break-even point of $16,000 and a tax rate of 25 percent imply a guarantee of which of the following figures?

69. The concept of relative poverty

Figure 21-1

70. In Figure 21-1, a reform in the distribution system that achieves the same distribution with less damage to work incentives is represented by a move from which points?

71. A free market system tends to

72. The concept of inequality

73. About what percentage of the poor are children?

74. Redistribution programs that reduce poverty and income inequality

75. The basic problem with the government setting an absolute poverty line is that it is

76. Which of the following best describes compensating wage differentials?

77. Assume that a company has several male workers who do not give their full cooperation to female supervisors making them less effective as supervisors. Economists would refer to this type of situation as ____.

78. The simplest economic definition of discrimination is

79. Who would receive payments from the government under a negative income tax system?

80. The essence of the trade-off between equality and efficiency is that

81. Employers near military bases are aware that wives generally accompany their servicemen husbands when they are transferred. When presented with nonservice-wife applicants and wives of servicemen, they hire the nonservice-wife applicants. This is an example of

82. Which of the following is not true of employers who discriminate in a competitive market?

83. If the United States is to reduce poverty by using a negative income tax, the guaranteed income should be

84. Aid to families with dependent children was

Figure 21-1

85. In Figure 21-1, if the existing antipoverty program were replaced by a negative income tax, most economists believe that it would result in a move like which of the following?

86. In 2017, about what percentage of total income was earned by the poorest fifth of all U.S. households?

87. If you fall short of a certain minimum standard of living, you are poor; once you pass this standard, you are no longer poor. This refers to the ____ definition of poverty.

88. The relative concept of poverty is based on income relative to the

89. One of the more powerful forces leading to an end in economic discrimination is

90. In the negative income tax plan, a guarantee of $5,000 and a tax rate of 50 percent imply a break-even income of which of the following figures?

91. Official data may overstate the extent of poverty because

92. Which of the following tax does not decrease income inequality?

93. From a purely economic point of view, discrimination exists when

94. Which of the following is most accurate about poverty in the United States as measured by the poverty line?

95. Compensation wage differentials are

96. In 2017, approximately what percent of Americans were below the poverty line?

97. Susan argues that she is the victim of economic discrimination. The primary technical difficulty for an economist investigating her claim will be

98. Many economists believe that

99. In the Santa Rita silver mines in Arizona in 1870, Mexican miners received about $12 per month, while “American” miners received $70. Although the wages of both groups tended to rise over time, the gap persisted until at least 1910. Mexican and American miners did the same work and were equally productive. Economists call this pay differential as

100. Economic discrimination and prejudice

101. The marginal productivity principle does not

102. Economists might be willing to accept a policy that adversely affected distribution of income if it

103. With a negative income tax, if people get at least $10,000 and the breakeven point is $50,000, what is the tax rate?

Figure 21-1

104. In Figure 21-1, the optimal amount of equality lies only between which points?

105. Which of the following countries has the most equal income distribution?

106. Which of the following is not a source of income inequality?

107. If income redistribution policy is based on the relative concept of poverty, the war on poverty

108. Which of the following measures absolute poverty?

109. If income is distributed equally in a society, the poorest fifth of the population receives

110. In 2017, about what percentage of total income was earned by the richest fifth of all U.S. households?

111. Since 1970, the share of income in the

112. In the United States, the distribution of income after the income tax is ____ the distribution of income before the income tax.

113. What does a market do poorly?

114. The official dividing line between the poor and nonpoor is called the

115. In 2017, the median income for a household of four was about

116. Risk taking

117. Under current federal antipoverty programs,

118. Affirmative action programs are intended to combat

119. With a negative income tax providing a minimum of $20,000 and a tax rate of 25 percent, what amount of supplement would the government pay to a household earning $10,000?

120. The extent of discrimination is

121. Under a system of free, competitive markets,

122. Tax loopholes serve to

123. The 1994 book by Murray and Herrnstein, The Bell Curve, was about

124. Policies that redistribute income

125. By law, employers in the United States may not ask prospective female employees whether they plan to have babies. The existence of this law seems most likely to

126. Which of the following is not a source of inequality in incomes?

127. Because of the book, The Other America, Michael Harrington was important in beginning the

128. If incomes were equally distributed in the United States, each fifth of the population would receive ____ percent of the income.

129. The distribution of income in the United States

130. In 2017, an income of $125,000 would, roughly, make a family

131. The poverty line is the income level

132. The distribution of income in the United States has grown substantially more unequal since about

133. Since the 1970s, the share of income in the top fifth of households

134. The poverty line is meant to distinguish

135. A negative income tax does not

136. An example of an in-kind benefit is

137. The national poverty rate in the United States reached a low in the

138. The existence of differences between the average earnings of men and women

139. Which of the following situations is the most common? Men and women

140. A tax is more likely to promote economic equality if it is

141. The basic idea behind a negative income tax is to

142. The economic theory of discrimination suggests that the practice of apartheid in South Africa should have

143. Economists generally agree that in reducing poverty, policies should be sought that do the

144. The welfare program economists believe to be most compatible with economic efficiency is

145. If one includes in-kind income in the calculation, the

146. Which of the following is not part of a negative income tax?

147. The factor accounting for most of the earnings difference between equally educated and experienced men and women is that women

148. Which of the following is not a policy to combat poverty?

149. The two ways to define poverty are which of the following?

150. Death taxes, both state and federal, account for about _____ percent of total tax revenue.

151. Is wage discrimination more likely in competitive or monopolistic markets?

152. How does the idea of a leaky bucket relate to the study of income distribution?

153. What is the difference between the absolute and relative concepts of poverty? What are the major problems in measuring poverty with them?

154. Competition reduces some but not all discrimination. Where can one expect competition to reduce discrimination, and where is discrimination likely to go on even if there is competition?

155. Discuss the criticisms leveled against the Aid to Families with Dependent Children program.

156. Compared to a negative income tax, the federal personal income tax is thought of as a way to promote greater equality. Why?

157. Define the following terms and explain their importance to the study of economics.

a. poverty line

b. economic discrimination

c. optimal inequality

d. negative income tax

158. Suppose that a negative income tax was created that set a minimum income for a family of $5,000 per year and had a marginal tax rate of 33 percent. What is the break-even level of income? If a person earned $5,000, what would the after-tax income level be? If the earnings were $10,000, what would the after-tax income be?

159. Is education the swiftest method to eliminate poverty. Explain.

160. What are the strengths and weaknesses of the negative income tax (NIT) as an alternative to traditional welfare programs?

161. What are the reasons for unequal distribution of income? List at least six reasons.

162. Suppose a professor announces at the beginning of a course that he will give no failing grades because they are too damaging to self-esteem. How does such a policy affect equality and efficiency?

163. Briefly and concisely define the following terms:

a. statistical discrimination

b. compensating wage differential

c. affirmative action

164. What has been the trend in eliminating poverty since 1960?

165. How is the dividing line between poverty and nonpoverty measured? Does this method overstate the degree of poverty?

166. Discuss the controversy surrounding affirmative action. How does this controversy illustrate the trade-off between equality and efficiency?

167. Explain why greater equality is inevitably gained at the expense of efficiency.

168. What are the two important programs in practice in America that strongly resemble a negative income tax?

169. Discuss the major programs to combat poverty and evaluate them on the basis of work incentives.

170. Define discrimination. Why does discrimination occur, and what evidence exists that it does occur?

171. How do income redistribution programs affect equality and efficiency?