Consider a Lorenz curve given by f(=) = z" for 0< z< 1 and n 2 1. %3D What happens to the Gini index G. I as n+ 00, and what's the interpretation of that result? S(z) = z" for 0
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- Which set of policies is more likely to cause a tradeoff between economic output and equality: policies of redistribution policies aimed at the ladder of opportunity? Explain how the production possibility frontier tradeoff between economic equality and output might look in each case.. Consider two communities. In one community,ten families have incomes of $100,000 each and tenfamilies have incomes of $20,000 each. In the othercommunity, ten families have incomes of $250,000each and ten families have incomes of $25,000 each.a. In which community is the distribution of incomemore unequal? In which community is theproblem of poverty likely to be worse?b. Which distribution of income would Rawls prefer?Explain.c. Which distribution of income do you prefer?Explain.d. Why might someone have the oppositepreference?assume there are two types of workers, low- and high-ability, and let 0 = 0.25 be the proportion of high-ability workers in the population. Assume their marginal productivity and, therefore, their wages are wh = $20 and wl = $16, and that both types can use college education to signal high ability. The cost of college education for low-ability workers is cl = $5 whereas the cost for high-ability workers is ch = $2. How much do firms pay to each worker type when they cannot differentiate them? (a) wh = $20 and wl = $16 (b) wh = $2 and wl = $5 (c) w = $17 (d) w = $18
- No written by hand solution Consider a 100-person economy, where half of the population receives 20% of the total income and the other half the remaining 80%. Using the Lorenz-curve approximation, what is the Gini coefficient in this economy (please use the comma to seprare decimals, such as: x,y)?Lp = x^p for p is greater than or equal to 1 - Does a low Gini index correspond to an equitable or inequitable distribution of wealth? Explain. - for a general L(x), explain why G=2AAssume that the current Disability Insurance (DI) benefi t for those whoare unable to work is $X per day and that DI benefi ts go to zero if aworker accepts a job for even 1 hour per week. Suppose that the benefi trules are changed so those disabled workers who take jobs that pay lessthan $X per day receive a benefi t that brings their total daily income(earnings plus the DI benefi t) up to $X. As soon as their labor marketearnings rise above $X per day, their disability benefi ts end. Draw theold and new budget constraints (label each clearly) associated with theDI program, and analyze the work-incentive effects of the change inbenefi ts.
- assume there are two types of workers, low- and high-ability, andlet 0 = 0.25 be the proportion of high-ability workers in the population. Assume their marginalproductivity and, therefore, their wages are wh = $20 and wl = $16, and that both types canuse college education to signal high ability. The cost of college education for low-ability workersis cl = $5 whereas the cost for high-ability workers is ch = $2. Consider the wage for both types of workers and the high-ability workers’ college cost, ch. For which values of 0 (the proportion of high-ability workers in the population) do the high-ability workers prefer the separating equilibrium over the pooling equilibrium? (a) Any 0 > 1/2(b) Any 0 < 1/2 (c) Any 0 < 3/4(d) Only when 0 = 1No written by hand solution Suppose there are two sectors, call them A [agriculture] and M [manufacturing]. People earn say $5 an hour in agriculture and $10 an hour in manufacturing. Suppose we are interested in the share of the bottom 40% and the richest 20%. Let x be the share of people in manufacturing. Derive a formula that gives you the shares of income earned by the lowest 40% of the population and the richest 20% of the population as a function of x. This is a connection between structural transformation and the behavior of inequality.Here is one hypothesis: A well-funded social safety net can increase economic equality but will reduce economic output. Explain why this might be so, and sketch a production possibility curve that shows this tradeoff.
- Consider a large tract of land that is used for grazing sheep. Now consider two differentproperty ownership regimes: common property ownership, in which all shepherds haveunrestricted access to the land, and private property ownership, in which there is a singlelandowner who hires shepherds up until the point where their wage is equal to the marginalproduct of their labor. Show graphically how common property resource ownership can lead toovergrazing (too many shepherds using the same open-access rangeland) in the absence ofinstitutional constraints that would ensure an efficient level of resource usage. Contrast this withprivate property ownership. On your graph, label the axes, the average and marginal products oflabor, the wage, scarcity rents, the efficient number of shepherds, and the number that would beexpected under common property ownership. Explain the source of the inefficiency. Wouldprivatization be equitable? Would it be possible to achieve an efficient resource…This question is in the context of the Becker model. Suppose Firm A and Firm B sell their output in the same output market, purchase inputs in the same input markets and use the same production technology. Suppose the owners of Firm A and Firm B hire only women, with the following inequality true:WF(1 + dA) < WMandWF(1 + dB) < WM.If the discrimination coefficient is higher for Firm A than Firm B (dA > dB), then which of the following statements is true?●Firm B will earn higher profits●Both firms will earn the same profits●Firm A will earn higher profits●Both firms will earn less profit than they would if they had d=0Questions Explain three methods of measuring the income inequality of a nation? 1.kuznet ratio 2. Lorenz curve 3. Gini coefficient As in the case of income distribution, calculation of wealth distribution is done by different entities using different measurements, resulting in a disparity in outcomes. In fact, commonly, wealthis narrowly defined as financial wealth—namely, cash on handand the money value of tangible and nonliquid assets. Even justthe market valuation of financial portfolios is commonly used todefine financial wealth. However, some may extend the definitionto include the value of income streams and insurance rights that,for the most part, cannot be transacted or encumbered. Theseinclude Medicare, Medicaid, and Social Security. When suchtransfers and public assistance are included, the poor and manyelderly could benefit, reducing the wealth disparity (Galbraith2016). To obtain net wealth, the value of the debts are subtractedsubtracted from the value of the assets.…
