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Income Inequality and Poverty 5041
172. Which of the following does not explain why data on income distribution and the poverty rate
give an incomplete picture of inequality?
a. in-kind transfers
b. economic life cycle
c. transitory income
d. All of the above contribute to an incomplete picture of inequality.
173. In the United States, long-term poverty, defined as a family having an income below the poverty
line for eight or more years, is
a. common, affecting approximately 25 percent of all American families.
b. common, affecting approximately 15 percent of all American families.
c. uncommon, affecting approximately 8 percent of all American families.
d. rare, affecting approximately 3 percent of all American families.
5042 Income Inequality and Poverty
174. In the United States, long-term poverty affects
a. more families than short-term poverty.
b. an equal number of families as short-term poverty.
c. slightly fewer families than short-term poverty.
d. many fewer families than short-term poverty.
175. Economic mobility in the United States is
a. great, so many of those below the poverty line are there only temporarily.
b. rare, so most of those below the poverty line are there for decades.
c. rare, yet many of those below the poverty line are there only temporarily.
d. unrelated to poverty.
Income Inequality and Poverty 5043
Multiple Choice – Section 02:
The Political Philosophy of Redistributing Income
1. Whether or not policymakers should try to make our society more egalitarian is largely a matter of
a. economic efficiency.
b. political philosophy.
c. egalitarian principles.
d. enhanced opportunity.
2. Which political philosophy believes that the government should equalize the incomes of all
members of society?
a. Utilitarianism.
b. Liberalism.
c. Libertarianism.
d. None of the above is correct.
5044 Income Inequality and Poverty
3. When the government taxes income as part of a redistribution program,
a. the poor pay higher taxes.
b. the rich always benefit more than the poor.
c. the poor are encouraged to work.
d. incentives to earn income are diminished.
4. When incentives to earn income are distorted by income redistribution programs,
a. losses can exceed potential gains from greater equality of income.
b. total income in an economy can fall.
c. total utility in society can fall.
d. All of the above are correct.
Income Inequality and Poverty 5045
5. Which of the following will not occur when government policies are enacted to make the
distribution of income more equitable?
a. People will alter their behaviors.
b. Incentives will be distorted.
c. Total utility will likely remain constant.
d. The allocation of resources will be less efficient .
6. A utilitarian government has to balance the gains from greater income equality against the losses
from distorted work incentives. To maximize total utility, therefore, the government
a. would never tax labor income.
b. must always achieve a fully egalitarian society.
c. enacts policies that only benefit the middle class.
d. stops short of a fully egalitarian society.
5046 Income Inequality and Poverty
7. Raising total utility is the prime objective of which political philosophy?
a. utilitarianism
b. liberalism
c. libertarianism
d. None of the above is correct.
8. “The government should choose policies to maximize the total utility of society.” This statement is
most closely associated with which political philosophy?
a. liberalism
b. utilitarianism
c. libertarianism
d. welfarism
Income Inequality and Poverty 5047
9. Utilitarianism is
a. a liberal religion that focuses on individual rights.
b. a political philosophy that believes the government should choose policies deemed to be just by
an impartial observer.
c. a political philosophy that believes the government should not redistribute income.
d. a political philosophy that believes the government should choose policies to maximize the total
utility of society.
10. According to a utilitarian, total social utility will be maximized when marginal dollars are
distributed to the people with the
a. lowest marginal utility of income.
b. highest marginal utility of income.
c. highest total utility from their income.
d. most productive labor resources.
5048 Income Inequality and Poverty
11. The founders of utilitarianism include
a. A. C. Pigou and John Maynard Keynes.
b. Jeremy Bentham and John Stuart Mill.
c. Augustin Cournot and Jean B. Say.
d. A. Kondratieff and Thomas Malthus.
12. Which of the following statements is characteristic of utilitarianism?
a. An extra dollar of income provides higher marginal utility to a poor person than to a rich person.
b. Social policies should be created behind a "veil of ignorance."
c. Society should strive to maximize the utility of its wealthiest member.
d. Equality of opportunity is more important than equality of incomes.
Income Inequality and Poverty 5049
13. According to utilitarians, the ultimate objective of public actions should be to
a. ensure the poor can afford an adequate diet.
b. distribute income uniformly.
c. maximize the sum of individual utility.
d. prevent all people from experiencing diminishing marginal utility.
14. The concept of utility is fundamental to utilitarianism and describes the
a. optimal distribution of wealth in society.
b. level of satisfaction derived from a person's circumstances.
c. method by which society chooses to allocate resources.
d. method whereby wealth is stored.
5050 Income Inequality and Poverty
15. The English philosophers Jeremy Bentham and John Stuart Mill founded the school of thought
called
a. liberalism.
b. libertarianism.
c. mobilism.
d. utilitarianism.
16. A utilitarian government must
a. calculate the utility of each individual in society.
b. avoid enacting any policies that redistribute income from the rich to the poor.
c. balance the gains from greater equality against the losses from distorted incentives.
d. pursue policies that do not affect the middle class.
Income Inequality and Poverty 5051
17. A utilitarian government will pursue policies that redistribute income from the rich to the poor.
One problem with these policies is that
a. everyone has less incentive to work hard.
b. the rich will work harder while the poor will not.
c. the poor will work harder while the rich will not.
d. everyone in the middle class ends up worse off.
18. In the parable of the leaky bucket, a fundamental problem with government redistribution
programs is identified. As long as the government only has "leaky buckets" at its disposal,
a. the costs of welfare programs will exceed the benefits.
b. it should not try to reach complete equality in income.
c. income equality will be the best policy option.
d. equality of economic opportunity will reduce society’s utility.
5052 Income Inequality and Poverty
19. The goal of utilitarians is to
a. apply the logic of individual decision making to questions concerning morality and public policy.
b. measure happiness and satisfaction.
c. redistribute income based on the assumption of increasing marginal utility.
d. All of the above are correct.
20. The goal of utilitarians is to
a. punish crimes and enforce voluntary agreements but not to redistribute income.
b. redistribute income until each person has equal earnings.
c. redistribute income until the marginal utility of the wealthiest person equals the total utility of
the poorest person.
d. redistribute income based on the assumption of diminishing marginal utility.
Income Inequality and Poverty 5053
21. Utilitarians believe
a. that the government should choose just policies as evaluated by an impartial observer behind a
“veil of ignorance.”
b. in the assumption of diminishing marginal utility.
c. that everyone in society should have equal utility.
d. that the government should not redistribute income.
22. Suppose a society consists of only two people, John and Jane. A utilitarian would say that the
proper role of government in this society is to
a. equalize the incomes of John and Jane.
b. equalize John’s utility and Jane’s utility.
c. equalize John’s marginal utility and Jane’s marginal utility.
d. maximize the sum of John’s utility and Jane’s utility.
5054 Income Inequality and Poverty
23. A society consists of three individuals: Larry, Margaret, and Nina. In terms of income and utility,
Larry is currently best-off, Margaret ranks in the middle, and Nina is worst-off. Which of the
following statements is correct?
a. Utilitarianism suggests that government policies should strive to maximize the sum of all three
individuals’ utility.
b. Liberalism suggests that government policies should strive to maximize the sum of Larry’s
utility and Nina’s utility.
c. Libertarianism suggests that government policies should strive to make Nina better off at the
cost of Larry and Margaret.
d. Utilitarianism suggests that the government policies should strive to make Nina better off than
Margaret.
24. The utilitarian case for redistributing income is based on the assumption of
a. collective consensus.
b. a notion of fairness engendered by equality.
c. diminishing marginal utility.
d. rising marginal utility.
Income Inequality and Poverty 5055
25. The concept of diminishing marginal utility is embedded in the utilitarian rationale for
a. trickle-down effects.
b. enhancing market efficiency.
c. redistributing income.
d. maintaining the status quo income distribution.
26. Diminishing marginal utility suggests that
a. more is always preferred to less.
b. the well-being of society is maximized when the distribution of income is equal.
c. the poor are less efficient at spending money than the rich.
d. the poor receive more satisfaction from the last dollar spent than the rich.
5056 Income Inequality and Poverty
27. Ms. Spring currently earns $100,000 a year, while her junior partner, Mr. Fall, earns $55,000 a
year. From the perspective of a utilitarian, if both of their incomes are subject to diminishing
marginal utility, taking a dollar from Ms. Spring and giving it to Mr. Fall will
a. increase society's total utility.
b. lower Ms. Spring's marginal utility of income.
c. increase Mr. Fall's marginal utility of income.
d. lower society’s total utility.
28. "An extra dollar of income gives more additional satisfaction to a poor person than to a rich
person." This is an important assumption of which political philosophy?
a. utilitarianism
b. liberalism
c. libertarianism
d. republicanism
Income Inequality and Poverty 5057
29. Which of the following statements illustrates diminishing marginal utility?
a. An extra dollar of income to a poor person provides that person with more additional utility
than does an extra dollar to a rich person.
b. An extra dollar of income to a poor person provides that person with less additional utility than
does an extra dollar to a rich person.
c. An extra dollar of income to a poor person provides that person with the same additional utility
as does an extra dollar to a rich person.
d. An extra dollar of income to a poor person provides that person with the same total utility as
does an extra dollar to a rich person.
30. Suppose society consists of three individuals: Phil, Jay, and Mitchell. Phil has $60,000 of income,
Jay has $200,000 of income, and Mitchell has $100,000 of income. A utilitarian would argue that
a. taking $1 from Mitchell and giving it to Phil would increase society’s total utility.
b. taking $1 from Mitchell and giving it to Jay would increase society’s total utility.
c. taking $1 from Phil and giving it to Jay would increase society’s total utility.
d. None of the above are correct because all three individuals have sufficient income.
5058 Income Inequality and Poverty
31. Suppose society consists of four individuals: Andy, Bill, Carl, and David. Andy has $20,000 of
income, Bill has $40,000 of income, Carl has $60,000 of income, and David has $80,000 of
income. A utilitarian would argue that
a. taking $1 from Bill and giving it to Carl would increase society’s total utility.
b. taking $1 from Carl and giving it to Andy would increase society’s total utility.
c. taking $1 from Carl and giving it to David would increase society’s total utility.
d. taking $1 from Bill and giving it to David would increase society’s total utility.
32. Which group (or groups) would be the most upset by wide variation in the income distribution?
a. utilitarians
b. utilitarians and liberals
c. libertarians
d. liberals and libertarians
Income Inequality and Poverty 5059
33. The maximin criterion for government policies is associated with
a. the school of thought called utilitarianism.
b. the school of thought called liberalism.
c. the school of thought called libertarianism.
d. the school of thought called stoicism.
34. Liberalism suggests that public policies should aim to
a. maximize the sum of utility of everyone in society.
b. maximize the well-being of the average person in society.
c. maximize the well-being of the worst-off person in society.
d. minimize the difference between the utility of the best-off person in the society and the utility
of the worst-off person in society.
5060 Income Inequality and Poverty
35. A society consists of three individuals: Sam, Tristan, and Ulyana. In terms of income and utility,
Sam is currently best-off, Tristan ranks in the middle, and Ulyana is worst-off. Which of the
following statements is correct?
a. Utilitarianism suggests that government policies should strive to maximize Ulyana’s utility.
b. Liberalism suggests that government policies should strive to increase Ulyana’s utility.
c. Libertarianism suggests that government policies should strive to improve Tristan’s utility at the
cost of Sam’s utility.
d. Libertarianism suggests that government policies should strive to make Sam, Tristan, and
Ulyana equally well off.
36. Liberalism is the political philosophy espoused by
a. Robert Nozick.
b. John Stuart Mill.
c. John Rawls.
d. Jeremy Bentham.
