DISC: The role of government
United States – BPROG: Analytic
The role of government
Policies to Combat Poverty
127. Who would receive payments from the government under a negative income tax system?
a.
everyone
b.
only people with no earnings
c.
only people with incomes below a certain level
d.
only people with incomes above a certain level
c
Easy
DISC: The role of government
United States – BPROG: Analytic
The role of government
Policies to Combat Poverty
128. With a negative income tax, the larger the difference between the break-even income level and the guaranteed level,
a.
the greater the tax rate (by definition).
b.
the greater the incentive to work.
c.
the smaller the number of people eligible to receive benefits.
d.
the more inequitable the resulting distribution of income will be.
Difficult
DISC: The role of government
United States – BPROG: Reflective Thinking – BPROG: Analysis
The role of government
Policies to Combat Poverty
129. Many economists believe that
a.
once a negative income tax system was in place, the United States could increase economic equality
indefinitely without reducing economic efficiency.
b.
a negative income tax would be less efficient than the current welfare system.
c.
replacing the current welfare system with a negative income tax would increase both economic efficiency and
economic equality.
d.
None of the above is correct.
c
Moderate
DISC: The role of government
United States – BPROG: Analytic
The role of government
Policies to Combat Poverty
130. In the United States, the distribution of income after the income tax is ____ the distribution of income before the
income tax.
a.
b.
c.
d.
c
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Other Policies to combat Inequality
131. Which of the following taxes tend to make income distribution in the United States more equal?
a.
sales (i.e., excise) taxes
b.
personal income taxes
c.
payroll taxes
d.
All of the above are correct.
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Other Policies to combat Inequality
132. A tax is more likely to promote economic equality if it is
a.
regressive.
b.
proportional.
c.
indirect.
d.
progressive.
Easy
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Other Policies to combat Inequality
133. Tax loopholes serve to
a.
improve the incomes of the poor.
b.
erode the progressivity of the income tax.
c.
increase the progressivity of the income tax.
d.
decrease work incentives for the poor.
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Other Policies to combat Inequality
134. Affirmative action programs are intended to combat
a.
poverty.
b.
economic inequality.
c.
discriminatory practices by employers.
d.
“comparable worth” systems of compensation.
c
Moderate
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Policies to Combat Discrimination
135. Critics of affirmative action programs argue that they
a.
promote statistical discrimination.
b.
impair economic efficiency by preventing firms from freely choosing the most productive employee for a
particular job.
c.
are not as efficient as quota systems at hiring women and minorities.
d.
All of the above are correct.
Moderate
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Policies to Combat Discrimination
136. Affirmative action programs,
a.
according to critics, are clearly quota systems that lead to reverse discrimination.
b.
according to supporters, make efforts to find qualified minorities and women and hire them.
c.
according to critics, clearly lead to the hiring of unqualified people and thus reduce efficiency.
d.
All of the above are true.
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Policies to Combat Discrimination
137. A free market system tends to
a.
produce a fairly equal distribution of income.
b.
pay people exactly what they are worth.
c.
produce a relatively unequal distribution of income.
d.
pay most people more than they are worth, at the expense of reducing firms’ profits.
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
A Look Back
138. The economic theory of discrimination suggests that the practice of apartheid in South Africa should have
a.
worsened the economic condition of only the blacks.
b.
worsened the economic condition of only the whites.
c.
worsened the economic condition of whites as well as others.
d.
improved the economic condition of the whites.
DISC: Labor markets
United States – BPROG: Reflective Thinking – BPROG: Analysis
Labor markets
Appendix: The Economic Theory of Discrimination
139. In the Santa Rita silver mines in Arizona in 1870, Mexican miners received about $12 per month while “American”
miners received $70. Although the wages of both groups tended to rise over time, the gap persisted until at least 1910.
Mexican and American miners did the same work and were equally productive. Economists call this pay differential
a.
prejudicial differentials.
b.
compensating differentials.
c.
economic discrimination.
d.
Lorenz discrimination.
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Appendix: The Economic Theory of Discrimination
140. Assume that a company has several male workers who do not give their full cooperation to female supervisors
making them less effective as supervisors. Economists would refer to this type of situation as ____.
a.
statistical discrimination
b.
discrimination by fellow workers
c.
discrimination by employers
d.
non-discrimination
DISC: Labor markets
United States – BPROG: Reflective Thinking – BPROG: Analysis
Labor markets
Appendix: The Economic Theory of Discrimination
141. Economic discrimination and prejudice
a.
are synonymous.
b.
must both exist in statistical discrimination.
c.
often occur together.
d.
are mutually exclusive.
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Appendix: The Economic Theory of Discrimination
142. A man may be preferred to a woman by an employer who will make a substantial investment in the training of the
employee because
a.
most employers are sexist and think that women belong in the home caring for children.
b.
as a group women tend to have a weaker attachment to the labor force than men.
c.
employers have observed that women are less productive than men on most jobs.
d.
employers are afraid women will disrupt the workplace by distracting the male employees.
DISC: Labor markets
United States – BPROG: Reflective Thinking – BPROG: Analysis
Labor markets
Appendix: The Economic Theory of Discrimination
143. If labor markets are competitive, discriminating employers
a.
will have to pay higher wages since the available labor supply is smaller.
b.
will have higher costs and therefore be at a competitive disadvantage.
c.
will be driven out of business by nondiscriminators.
d.
All of the above are true.
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Appendix: The Economic Theory of Discrimination
144. Because of the owner’s prejudice, a firm chooses to discriminate against hiring Oriental workers. Compared to an
otherwise identical nondiscriminating firm hiring in the same competitive market, the discriminating firm will have
a.
higher costs.
b.
lower profits.
c.
a lower quantity of labor supplied at every wage.
d.
All of the above are correct.
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Appendix: The Economic Theory of Discrimination
145. When employers discriminate, they
a.
believe they have a sound economic reason for doing so.
b.
may pay the price in lost earnings and productivity.
c.
subject themselves to civil action.
d.
All of the above are correct.
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Appendix: The Economic Theory of Discrimination
146. Employers near military bases are aware that wives generally accompany their servicemen husbands when they are
transferred. When presented with nonservice-wife applicants and wives of servicemen, they hire the nonservice-wife
applicants. This is an example of
a.
gender discrimination.
b.
statistical discrimination.
c.
economic discrimination.
d.
prejudicial discrimination.
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Appendix: The Economic Theory of Discrimination
147. By law, employers in the United States may not ask prospective female employees whether they plan to have babies.
The existence of this law seems most likely to
a.
increase the probability that firms will practice economic discrimination against women.
b.
decrease the probability that firms will practice economic discrimination against women.
c.
increase the probability that firms will practice statistical discrimination against women.
d.
decrease the probability that firms will practice statistical discrimination against women.
DISC: Labor markets
United States – BPROG: Reflective Thinking – BPROG: Analysis
Labor markets
Appendix: The Economic Theory of Discrimination
148. Japanese employers tend to hire employees right out of college and train them for a lifetime job with the company.
Over time they found that women often, but not always, married after a few years and left the company so they were not
good training investments. Based on this experience, and despite the exceptions, firms stopped hiring any women for jobs
that require substantial training. This practice is called
a.
economic discrimination.
b.
statistical discrimination.
c.
compensating differentials.
d.
the substitution effect.
149. Generally speaking, markets do a(n) ____ job of reconciling the demands of fairness and efficiency.
a.
excellent
b.
above-average
c.
average
d.
poor
Moderate
150. The distribution of income in the United States has grown substantially more unequal since about:
a.
1970
b.
1980
c.
1990
d.
2000
Easy
151. Death taxes, both state and federal, account for about _____ percent of total tax revenue.
a.
1%
b.
2%
c.
3%
d.
10%
a
Moderate
152. Define the following terms and explain their importance to the study of economics.
a.
poverty line
b.
economic discrimination
c.
optimal inequality
d.
negative income tax
the economy, reducing GDP, etc.
DISC: The role of government
United States – BPROG: Analytic
The role of government
The Facts: Poverty
153. Briefly and concisely define the following terms:
a.
statistical discrimination
b.
compensating wage differential
c.
affirmative action
However it can still be a source of inefficiency.
DISC: The role of government
United States – BPROG: Analytic
The role of government
154. What is the difference between the absolute and relative concepts of poverty? What are the major problems in
measuring poverty with them?
155. What has been the trend in eliminating poverty since 1960?
156. How is the dividing line between poverty and nonpoverty measured? Does this method overstate the degree of
poverty?
157. How does the idea of a leaky bucket relate to the study of income distribution?
158. What are the reasons for unequal distribution of income? List at least six reasons.
159. Define discrimination. Why does discrimination occur and what evidence exists that it does occur?
160. Is wage discrimination more likely in competitive or monopolistic markets?
161. Competition reduces some but not all discrimination. Where can one expect competition to reduce discrimination,
and where is discrimination likely to go on even if there is competition?
162. Explain why greater equality is inevitably gained at the expense of efficiency.
163. Is education the swiftest method to eliminate poverty. Explain.
164. Suppose a professor announces at the beginning of a course that he will give no failing grades because they are too
damaging to self-esteem. How does such a policy affect equality and efficiency?
165. How do income redistribution programs affect equality and efficiency?
166. Discuss the criticisms leveled against the Aid to Families with Dependent Children program.
167. What are the strengths and weaknesses of the negative income tax (NIT) as an alternative to traditional welfare
programs?
168. Suppose that a negative income tax was created that set a minimum income for a family of $5,000 per year and had a
marginal tax rate of 33 percent. What is the break-even level of income? If a person earned $5,000, what would the after-
tax income level be? If the earnings were $10,000, what would the after-tax income be?
169. What are the two important programs in practice in America that strongly resemble a negative income tax?
170. Compared to a negative income tax, the federal personal income tax is thought of as a way to promote greater
equality. Why?
171. Discuss the controversy surrounding affirmative action. How does this controversy illustrate the trade-off between
equality and efficiency?
172. Discuss the major programs to combat poverty and evaluate them on the basis of work incentives.