Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
Question
Chapter 28, Problem 15CQ
To determine

Check whether the outcome is fair or not.

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Suppose 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.
True or false: An increase in the share of income earned by the top half of the income distribution implies that the bottom half’s share and per capita income both decreased. (Be sure to address both “share” and “per capita income.”).
Under current law, most Social Security recipients do not pay federal or state income taxes on their Social Security benefits. Suppose the government proposes to tax these benefits at the same rate as other types of income. What is the impact of the proposed tax on the optimal retirement age?
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  • Using the diagram above, which of the following is true? a. In country S the poorest 30 percent of the population receive 13 percent of the available income in country S. b. In country T the richest 10 percent of the population receive 23 percent of the available income in country T. c. In country S the richest 10 percent of the population receive 55 percent of the available income in country S. d. Country S has a more equal distribution of income than does country T. e. None of the above is true.
    Assume a society consists of two economic​ groups: one group is rich and the other group is poor. Suppose that 50 percent of the population is rich while the other 50 percent of the population is poor. Consider two scenarios.   Scenario​ A: The rich have ​$80,000 ​each, while the poor have ​$5,000 each.   Scenario​ B: The rich have ​$11,000 ​each, while the poor have ​$900 each.   If you only care about average income and not about​ equity, you would prefer ▼   Scenario A Scenario B ​, which has an average income of ​$........?? ​(Enter your response to the nearest dollar​.) Now suppose that you only care about equity or inequality.   In this​ case, you would prefer ▼   Scenario B Scenario A ​, which has a​ rich-to-poor ratio of .........?? ​(Round your response to one decimal place​.) ​Finally, suppose you only care about living standards.   In this​ case, you would prefer ▼   Scenario A Scenario B because it has lower poverty.
    Susan is a single mother with three children. She is a cashier at a food market earning $7.75 per hour and works up to 2,000 hours per year. She is eligible for government benefits, so if she does not earn any income, she will receive a total of $17,050 per year. She can work and still receive government benefits, but for every $1 of income, her government stipend is $1 less.  The government has decided to change the benefits policy of every $1 of income earned to reduce the government’s stipend by 60 cents. How will this change Susan's benefits received? What are her new choices? Complete the Revised Poverty Trap Table to present Susan’s options and provide answers to the following: What are the advantages of Susan working? What are the disadvantages of Susan working? What are the advantages of Susan receiving government benefits? What are the disadvantages of Susan receiving government benefits? Based on your findings from the Poverty Trap Table, should Susan continue to work…
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