Chapter 20 Test Bank Key
1. Transfer payments are
2. Transfer payments include all of the following except
3. Which of the following programs is the largest federal income transfer program?
4. Which of the following programs is the second-largest federal income transfer program?
5. Which of the following is a goal of an in-kind transfer program but not a cash transfer program?
A. To change the market’s answer to the FOR WHOM question.
6. In-kind transfers are
7. In-kind transfers
8. In-kind transfers
A. Are a payment for work.
9. Which of the following is not an example of in-kind
income? A. Food stamps.
10. Which of the following is an example of an in-kind transfer?
11. Income transfers that entail direct payments to recipients, such as unemployment benefits, are known as
12. Social Security is an example of
13. Social Security benefits paid by the federal government
14. Which of the following is most likely to occur if Medicare is converted from an in–kind transfer program to a cash
transfer program?
15. The percentage of income transfers that go to the intended recipients and purposes refers to
16. Which of the following programs is likely to have low target efficiency?
17. Which of the following student aid programs is likely to have the highest target efficiency?
18. Means-tested income transfer programs are referred to as
19. When a program is means-tested, it means that
20. To be eligible for a welfare program, the recipient must
21. Which of the following is a welfare program?
A. Food stamps.
23. Social insurance programs are
24. In 2015, the largest U.S. in-kind transfer program was
25. Social insurance programs
26. Welfare programs differ from social insurance programs in that welfare programs
27. A market failure exists when an imperfection in
28. The existence of transfer programs implies that
29. A goal of income transfer programs is to do all of the following except
30. Which of the following is least likely to be the case?
31. The existence of income transfer programs can
32. The existence of income transfer programs is likely to
33. The existence of income transfer programs can
34. Welfare benefits reduce the need to work and result in a shift in the
35.
Refer to Figure 34.1. Suppose the production possibilities curve PP2 represents the U.S. economy and point C
represents the combination of goods and services currently being produced. If welfare discourages people from
seeking work, the most likely result of eliminating welfare in the United States would be
36.
Refer to Figure 34.1. Suppose the production possibilities curve PP2 represents the goods and services
produced in the U.S. economy. If welfare discourages people from seeking work, and laws change so that
more people receive welfare benefits, the most likely result would be
37.
Figure 34.2 illustrates two labor supply curves. If in-kind payments become readily available in this economy
and marginal tax rates increase significantly, we would expect a shift from
38.
Figure 34.2 illustrates two labor supply curves. If in-kind payments become less available in this economy
and marginal tax rates decrease significantly, we would expect a shift from
39. The poverty gap is the
40. The shortfall between actual income and the poverty threshold is the
41. If welfare benefits equaled the poverty gap for each household in poverty, then
42. The official poverty index is based on
A. Family size and income.
43. Which of the following is used to determine if a family is in poverty?
44. If welfare benefits equal the poverty gap for each household in poverty, then the
45. If welfare benefits equal the poverty gap for each household in poverty,
46. Moral hazard is
47. Welfare support creates a moral hazard by
A. Reducing the need to work.
48. A lower marginal tax rate for welfare recipients
49. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – 0.7 [Wages –
(Work expenses + Child care costs)] Based on the information given, the marginal tax rate is
A. Zero percent.
50. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – 0.7 [Wages –
(Work expenses + Child care costs)] Suppose Miller works 2,000 hours per year at a wage of $8 per hour, has
child care expenses of $3,000 per year, and has work expenses of $2,000. If the state maximum welfare benefit
is $10,000 per year, based on the welfare formula given, Miller’s welfare benefit will be
51. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – 0.7 [Wages –
(Work expenses + Child care costs)] Suppose Ramirez works 1,800 hours per year at a wage of $7 per hour,
has no child care expenses, and has work expenses of $600. If the state maximum welfare benefit is $13,000
per year, based on the welfare formula given, Ramirez’s welfare benefit will be
A. Zero because his income has exceeded the limit.
52. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – 0.7 [Wages –
(Work expenses + Child care costs)] Suppose Carter works 1,200 hours per year at a wage of $6 per hour, has
child care expenses of $2,200 per year, and has work expenses of $800. If the state maximum welfare benefit
is $12,000 per year, based on the welfare formula given, Carter’s welfare benefit will be
53. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – 0.4 [Wages –
(Work expenses + Child care costs)] Based on the information given, the marginal tax rate is
54. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – 0.4 [Wages –
(Work expenses + Child care costs)] Suppose Shanika works 2,000 hours per year at a wage of $6 per hour,
has child care expenses of $3,000 per year, and has work expenses of $900. If the state maximum welfare
benefit is $11,000 per year, based on the welfare formula given, Shanika’s welfare benefit will be
55. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – 0.4 [Wages –
(Work expenses + Child care costs)] Suppose Emily works 1,800 hours per year at a wage of $8 per hour, has
child care expenses of $4,000 per year, and has work expenses of $1,000. If the state maximum welfare benefit
is $12,000 per year, based on the welfare formula given, Emily’s welfare benefit will be
56. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – Wages Based
on the information given, the marginal tax rate is
57. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – Wages
Suppose Parker works 2,000 hours per year at a wage of $12 per hour. If the state maximum welfare benefit is
$14,000 per year, based on the welfare formula given, Parker’s welfare benefit will be
A. Zero.
58. Use the following formula to answer the indicated question: Welfare benefit = Maximum benefit – Wages
A welfare system based on the welfare formula given
59. Lower marginal tax rates for welfare programs will
A. Decrease the incentive to work.
60. Higher marginal tax rates for welfare programs will
61. A marginal tax rate of zero for welfare programs will
62. An assistance program that guarantees a minimum income, regardless of the family’s earned income, has a
63. Which of the following statements concerning lower marginal tax rates is correct?
A. They encourage work effort and make more people eligible for welfare benefits.
64. Which of the following statements concerning higher marginal tax rates is correct?
65. The breakeven level of income is
66. The breakeven level of income is the
A. Lowest level of income at which in-kind benefits are no longer necessary.
67. The breakeven level of income equals the
A. Minimum amount of income society considers desirable for households to have.
68. Higher breakeven levels of income can be achieved by decreasing
A. In-kind benefits.
69. Welfare costs can be reduced by
A. Decreasing the breakeven level of income.
70. Suppose a poverty program has a basic benefit of $5,000, zero deductions, and a marginal tax rate of
0.50. The breakeven level of income is
A. $2,500.
71. Suppose a poverty program provides a basic benefit of $6,000, zero deductions, and a marginal tax rate of
0.6. The breakeven level of income is
72. Suppose a poverty program has a basic benefit of $12,000, zero deductions, and a marginal tax rate of 0.80.
The breakeven level of income is
A. $12,000.
73. Suppose a poverty program has a basic benefit of $14,000, zero deductions, and a marginal tax rate of 0.70.
The breakeven level of income is
74. Suppose a poverty program has a basic benefit of $10,000, zero deductions, and a breakeven level of
income of $25,000. The marginal tax rate is ____ percent.
A. 2.50
75. Suppose a poverty program has a basic benefit of $10,000, and a family can earn up to $20,000 before losing
all welfare benefits. The marginal tax rate is ____ percent.
A. 2.0
76. Suppose a poverty program has a basic benefit of $8,000, and a family can earn up to $16,000 before losing all
welfare benefits. The marginal tax rate is ____ percent.