Economics (6th Edition)
6th Edition
ISBN: 9780134105840
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 18, Problem 18.4.7PA
Subpart (a):
To determine
What is assortative mating.
Subpart (b):
To determine
How assortative contributes to income inequality.
Subpart (c):
To determine
The role of the government to reduce the households.
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How would a utilitarian, a liberal, and a libertarian determine how much income inequality is permissible?
Consider a society consisting of two people. Jacques earns an income of $100,000 per year and Kyoko earns an income of $30,000 per year. The government is considering a redistribution plan that would impose a 25% tax on Jacques's income and give the revenue to Kyoko.
Without any incentive distortion, Jacques would retain $75,000 and Kyoko would end up with $55,000. However, let us assume that since Jacques will not receive all the income he earns, he decides to work less and earn an income of only $90,000, of which 25%×$90,000=$22,50025%×$90,000=$22,500 will be owed in taxes.
With the redistribution plan, Jacques will take home an income of
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The $22,500 that Jacques pays in taxes will be transferred by the government to Kyoko. Let us assume that since Kyoko now receives payment from the government, she will not work as many hours and will earn an income from work of only $29,000 instead of her initial $30,000.
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True or false
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Chapter 18 Solutions
Economics (6th Edition)
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4RQCh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.1.11PACh. 18 - Prob. 18.1.12PACh. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.10PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3PACh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.8PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.3.11PACh. 18 - Prob. 18.4.1RQCh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.3RQCh. 18 - Prob. 18.4.4RQCh. 18 - Prob. 18.4.5RQCh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.4.9PACh. 18 - Prob. 18.4.10PACh. 18 - Prob. 18.4.11PACh. 18 - Prob. 18.4.12PACh. 18 - Prob. 18.4.13PACh. 18 - Prob. 18.4.14PACh. 18 - Prob. 18.4.15PA
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Similar questions
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- Your friend points to the wages earned by your economics professor and her teaching assistant (TA) as an example of income inequality. Your tenured professor earns $120,000$120,000, drives a BMW, and vacations in Europe, whereas your TA earns $10,000$10,000 per year, rides a bike, and vacations at his mom's house. Because they both teach for a living, your friend argues that this income inequality is not just. Which reply uses the economic life cycle to respond to your friend's argument? Your professor has more bargaining power than your TA and, therefore, has higher earnings. Your professor and TA earn different amounts now but they will have similar earnings over the course of their lives. Your professor was once a TA, and your TA will one day make better money. Your professor has many more responsibilities than your TA and is, therefore, paid more. Older workers typically have more expenses than younger workers due to the high cost of healthcare and other costs…arrow_forwardAs coronavirus deepens inequality, inequality worsens its spread. Explain with comprehensive what the government can do to overcome or at least minimize the problems raised in the articlearrow_forwardBelow is a Lorenz Curve for a given country. Suppose its government establishes a 10% income tax on persons earning more than $500,000/year and uses the proceeds to subsidize secondary education. Show how the tax would affect income inequality by drawing the new Lorenz Curve.arrow_forward
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