Microeconomics with Connect Access Card
20th Edition
ISBN: 9781259278556
Author: Campbell McConnell
Publisher: McGraw-Hill Education
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Chapter 21, Problem 3RQ
To determine
Which of the statements are true about the Income inequality is true and which are false.
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A5.
Suppose that the initial rural distribution of income is (1, 2, 3, 4) while the initial urban distribution is (3, 4). The poverty line is 2, so the overall poverty rate (headcount index) is 1/3. Now imagine that all of the rural poor move to urban areas and each of them gains 20% in real income. Verify that the overall poverty rate falls to 1/6, yet the urban poverty rate rises from zero to 1/4.
(Last Word) The combined cost of Social Security and Medicare programs was what percent of U.S. GDP in 2008
(A) 7.6
(B) 12.4
(C) 17.2
(D) 2.9
As one of the largest and fastest-growing industries in 2018, health care provided how many jobs for wage and salary workers? O 18 million 30 million 3 pts O 24 million O 12 million
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- If the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns percent and a marginal tax rate of $50,000 has an average tax rate of percent. O 15, 25 O 25, 15 O 25, 30 O 30, 25arrow_forwardassume 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 = $18arrow_forward. 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?arrow_forward
- Suppose the members of population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. What percentage of total income is received by the highest 60 percent of the income receivers in population A? Multiple Choice O O O O 87.5 25 60 76.5 < Prev 5 of 10 www www www Nearrow_forwardSuppose that a society contains only two members, a lawyer named Monique and a handyman named James. Five years ago, Monique made $100,000 while James made $50,000. This year, Monique will make $300,000 while James will make $100,000. Which of the following statements about this society’s income distribution are true? a. In absolute dollar amounts, the entire distribution of income has been moving upward. b. In absolute dollar amounts, the entire distribution of income has been stagnant. c. The relative distribution of income has become more equal. d. The relative distribution of income has become less equal. The relative distribution of income has remained constant. f. The rich are getting richer while the poor are getting poorer. g. The rich are getting richer faster than the poor are getting richer.arrow_forward20.7 Essay: How Economic Inequality Arises 1) What is "human capital" and why is it considered an investment? 2) What is "human capital"? How is it important in the determination of a worker's wage rate? 3) How is human capital acquired? 4) How does the demand for high-skilled workers compare to the demand for low-skilled workers? Why does this difference exist? 5) How does an increase in the cost to acquire a skill affect the vertical distance between the supply curves of high-skilled and low-skilled workers?arrow_forward
- Assume that the productivity of farm labour depends on daily caloric intake, similarly to that depicted in Figure17.4. Using this kind of diagram, compare the efficiency wages that would apply to the following two types of workers: • A landless labourer • A labourer with small plot of land on which he grows staple crops Describe the likely equilibrium unemployment rates and wage rates for landless labourers and small landholders. Judging partially on the basis of this example, what sorts of data and what empirical strategies might you use to see whether nutritional efficiency wages were an important element in the rural labour markets of poor, rural economies?arrow_forward5. Renika has $60,000 dollars in wealth, but the official poverty statistics count her as being in poverty. Explain why this is. If Renika has quit her job in order to go to graduate school, and $60,000 reflects her cash savings, do you agree that she is in poverty? What if Renika is elderly and the $60,000 reflects the value of her rural home?arrow_forward1. The absolute value of the slope of the consumption-leisure budget line is the after-tax wage, W. Suppose some workers (L1) earn W for up to 40 hours of work each week, and then earn 2W for any hours worked thereafter (called overtime). Other workers (L2) earn W for up to 40 hours of work each week, and then only earn 0.5W thereafter as working more than 40 hours requires getting a second job which pays an hourly wage less than their primary job. Both types of workers experience a “kink” in their consumption-leisure budget line. A. Refer to graph. Which one of the statements below describes the consumption-leisure budget line for L1 and L2 a. L2 budget line is CBT-40 b. L2 budget line is ABT c. L1 budget line is CBT d. L1 budget line is ABT B. Refer to graph. Which type of worker is likely to work up to the point of the kink? a. L1 b. L2 C. Refer yo graph. Which type of worker is likely to choose a consumption-leisure bundle far away from the kink a. L1 b. L2arrow_forward
- 5. Suppose that John could work 365 days per year and could earn $200 per day for each day he worked. a. Draw his budget line with respect to his labor-leisure tradeoff b. Suppose that John chooses to work 200 days per year. Draw the appropriate indifference curve, and not his equilibrium wage income and labor-leisure choices c. Suppose that John’s wage rises to $210 per day. Show how his equilibrium level of income and labor-leisure will change. d. Suppose John is ill ten days per year. Draw the impact of this illness on the equilibrium above. How will it change his equilibrium allocation of earnings and labor vs. leisure?arrow_forward4.12. A social choice function satisfies the bottom criterion if, whenever a candidate is not at the bottom of the preference list of any voter,that candidate is a winner.(a) Does the plurality method satisfy the bottom criterion?(b) Does the antiplurality method satisfy the bottom criterion?(c) Explain why it is impossible for a social choice function with three ormore candidates to satisfy both the bottom criterion and the Paretocriterion.arrow_forward4. Suppose that there are two households in the economy, A and B, that they face the same wage rate w, and that the government initially uses a proportional income tax according to which each household must pay a fraction t of its labor income as income tax. Assume that given this tax scheme household A chooses to work full time while household B chooses to work part time. Now suppose that the government is interesting in studying the impact of changing the tax system to a progressive tax system where the household work- ing full time would pay a tax rate th >t while the household working part time would pay a rate ti < t. (a) Draw a graph of the impact of this change on the budget constraint that households face with the two different tax systems. (b) What would such a change in the tax system imply for the optimal choice of the two households?arrow_forward
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