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Principles of Microeconomics

Steven A. Greenlaw, David Shapiro

Chapter 15

Poverty and Economic inequality - all with Video Answers

Educators

Chapter Questions

01:51

Problem 1

Describe how each of these changes is likely to affect poverty and inequality:
a. Incomes rise for low-income and high-income workers, but rise more for the high-income earners.
b. Incomes fall for low-income and high-income workers, but fall more for high-income earners.

Jiali Liu
Jiali Liu
Numerade Educator
02:53

Problem 2

Jonathon is a single father with one child. He can work as a server for $\$ 6$ per hour for up to 1,500 hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of $\$ 10,000$ per year. He can work and still receive government benefits, but for every $\$ 1$ of income, his welfare stipend is $\$ 1$ less. Create a table similar to Table 15.4 that shows Jonathan's options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (eamings + government support). Sketch a labor-leisure diagram of Jonathan's opportunity set with and without government support.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
02:18

Problem 3

Imagine that the government reworks the welfare policy that was affecting Jonathan in question $1,$ so that for each dollar someone like Jonathan earns at work, his government benefits diminish by only 30 cents. Reconstruct the table from question 1 to account for this change in policy. Draw Jonathan's labor-leisure opportunity sets, both for before this welfare program is enacted and after it is enacted.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
02:59

Problem 4

We have discovered that the welfare system discourages recipients from working because the more income they earn, the less welfare benefits they receive. How does the earned income tax credit attempt to loosen the poverty trap?

Mihir Nayar
Mihir Nayar
Numerade Educator
02:55

Problem 5

How does the TANF attempt to loosen the poverty trap?

Jiali Liu
Jiali Liu
Numerade Educator
03:11

Problem 6

A group of 10 people have the following annual incomes: \$24,000, \$18,000, \$50,000, \$100,000, \$12,000, S36,000, \$80,000, \$10,000, \$24,000, \$16,000. Calculate the share of total income that each quintile receives from this income distribution. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution?

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
08:05

Problem 7

Table 15.9 shows the share of income going to each quintile of the income distribution for the United Kingdom in 1979 and $1991 .$ Use this data to calculate what the points on a Lorenz curve would be, and sketch the Lorenz curve. How did inequality in the United Kingdom shift over this time period? How can you see the patterns in the quintiles in the Lorenz curves?

Omkar Katta
Omkar Katta
Numerade Educator
02:22

Problem 8

Using two demand and supply diagrams, one for the low-wage labor market and one for the high-wage labor market, explain how information technology can increase income inequality if it is a complement to high-income workers like salespeople and managers, but a substitute for low-income workers like file clerks and telephone receptionists.

Jiali Liu
Jiali Liu
Numerade Educator
01:40

Problem 9

Using two demand and supply diagrams, one for the low-wage labor market and one for the high-wage labor market, explain how a program that increased educational levels for a substantial number of low-skill workers could reduce income inequality.

Jiali Liu
Jiali Liu
Numerade Educator
01:29

Problem 10

Here is one hypothesis: A well-funded social safety net can increase economic equality but will reduce economic output. Explain why this might be so, and sketch a production possibility curve that shows this trade-off.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:20

Problem 11

Here is a second hypothesis: A well-funded social safety net may lead to less regulation of the market economy. Explain why this might be so, and sketch a production possibility curve that shows this trade-off.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
02:35

Problem 12

Which set of policies is more likely to cause a tradeoff between economic output and equality: policies of redistribution or policies aimed at the ladder of opportunity? Explain how the production possibility frontier tradeoff between economic equality and output might look in each case.

Jiali Liu
Jiali Liu
Numerade Educator
01:14

Problem 13

Why is there reluctance on the part of some in the United States to redistribute income so that greater equality can be achieved?

Jiali Liu
Jiali Liu
Numerade Educator
02:19

Problem 14

How is the poverty rate calculated?

Mihir Nayar
Mihir Nayar
Numerade Educator
02:21

Problem 15

What is the poverty line?

Jiali Liu
Jiali Liu
Numerade Educator
04:01

Problem 16

What is the difference between poverty and income inequality?

Mihir Nayar
Mihir Nayar
Numerade Educator
01:17

Problem 17

How does the poverty trap discourage people from working?

Jiali Liu
Jiali Liu
Numerade Educator
03:13

Problem 18

How can the effect of the poverty trap be reduced?

Mihir Nayar
Mihir Nayar
Numerade Educator
00:36

Problem 19

Who are the near-poor?

Jiali Liu
Jiali Liu
Numerade Educator
01:41

Problem 20

What is the safety net?

Mihir Nayar
Mihir Nayar
Numerade Educator
03:00

Problem 21

Briefly explain the differences between TANF, the earned income tax credit, SNAP, and Medicaid.

Tanner Fonjweng
Tanner Fonjweng
Numerade Educator
03:34

Problem 22

Who is included in the top income quintile?

Mihir Nayar
Mihir Nayar
Numerade Educator
01:08

Problem 23

What is measured on the two axes of a Lorenz curve?

Jiali Liu
Jiali Liu
Numerade Educator
01:33

Problem 24

If a country had perfect income equality what would the Lorenz curve look like?

Mihir Nayar
Mihir Nayar
Numerade Educator
04:57

Problem 25

How has the inequality of income changed in the U.S. economy since the late 1970 s?

Noor Almesad
Noor Almesad
Numerade Educator
01:58

Problem 26

What are some reasons why a certain degree of inequality of income would be expected in a market economy?

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
01:18

Problem 27

What are the main reasons economists give for the increase in inequality of incomes?

Jiali Liu
Jiali Liu
Numerade Educator
01:06

Problem 28

Identify some public policies that can reduce the level of economic inequality.

Jiali Liu
Jiali Liu
Numerade Educator
02:08

Problem 29

Describe how a push for economic equality might reduce incentives to work and produce output. Then describe how a push for economic inequality might not have such effects.

Jiali Liu
Jiali Liu
Numerade Educator
02:55

Problem 30

What goods and services would you include in an estimate of the basic necessities for a family of four?

Mihir Nayar
Mihir Nayar
Numerade Educator
View

Problem 31

If a family of three earned $\$ 20,000,$ would they be able to make ends meet given the official poverty threshold?

Majid Borumand
Majid Borumand
Numerade Educator
05:19

Problem 32

Exercise 15.2 and Exercise 15.3 asked you to describe the labor-leisure tradeoff for Jonathon. since, in the first example, there is no monetary incentive for Jonathon to work, explain why he may choose to work anyway. Explain what the opportunity costs of working and not working might be for Jonathon in each example. Using your tables and graphs from Exercise 15.2 and Exercise $15.3,$ analyze how the government welfare system affects Jonathan's incentive to work.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
00:38

Problem 33

Explain how you would create a government program that would give an incentive for labor to increase hours and keep labor from falling into the poverty trap.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
03:18

Problem 34

Many critics of government programs to help low-income individuals argue that these programs create a poverty trap. Explain how programs such as TANF, EITC, SNAP, and Medicaid will affect low-income individuals and whether or not you think these programs will benefit families and children.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
13:03

Problem 35

Think about the business cycle: during a recession, unemployment increases; it decreases in an expansionary phase. Explain what happens to TANF, SNAP, and Medicaid programs at each phase of the business cycle (recession, trough, expansion, and peak).

DK
Dylan Katz
Numerade Educator
01:02

Problem 36

Explain how a country may experience greater equality in the distribution of income, yet still experience high rates of poverty. Hint: Look at the Clear It Up "How do governments measure poverty in low-income countries?" and compare to Table 15.5.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
00:52

Problem 37

The demand for skilled workers in the United States has been increasing. To increase the supply of skilled workers, many argue that immigration reform to allow more skilled labor into the United States is needed. Explain whether you agree or disagree.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
05:36

Problem 38

Explain a situation using the supply and demand for skilled labor in which the increased number of college graduates leads to depressed wages. Given the rising cost of going to college, explain why a college education will or will not increase income inequality.

Pragya Ahuja
Pragya Ahuja
Numerade Educator
01:54

Problem 39

What do you think is more important to focus on when considering inequality: income inequality or wealth inequality?

Jiali Liu
Jiali Liu
Numerade Educator
01:06

Problem 40

To reduce income inequality, should the marginal tax rates on the top $1 \%$ be increased?

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
01:53

Problem 41

Redistribution of income occurs through the federal income tax and government antipoverty programs. Explain whether or not this level of redistribution is appropriate and whether more redistribution should occur.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
02:53

Problem 42

How does a society or a country make the decision about the tradeoff between equality and economic output? Hint: Think about the political system.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
19:05

Problem 43

Explain what the long- and short-term consequences are of not promoting equality or working to reduce poverty.

Paul A.
Paul A.
California State Polytechnic University, Pomona
04:00

Problem 44

In country A, the population is 300 million and 50 million people are living below the poverty line. What is the poverty rate?

Mihir Nayar
Mihir Nayar
Numerade Educator
01:05

Problem 45

In country $\mathrm{B}$, the population is 900 million and 100 million people are living below the poverty line. What is the poverty rate?

Jiali Liu
Jiali Liu
Numerade Educator
02:28

Problem 46

Susan is a single mother with three children. She can earn $\$ 8$ per hour and works up to 2,000 hours per year. However, if she does not earn any income at all, she will receive government benefits totaling $\$ 16,000$ per year. For every $\$ 1$ of income she earns, her level of government support will be reduced by $\$ 1 .$ Create a table, patterned after Table $15.8 .$ The first column should show Susan's choices of how many hours to work per year, up to 2,000 hours. The second column should show her earnings from work. The third column should show her level of government support, given her earnings. The final column should show her total income, combining earnings and government support.

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
03:11

Problem 47

A group of 10 people have the following annual incomes: $\$ 55,000, \$ 30,000, \$ 15,000, \$ 20,000, \$ 35,000$ $\$ 80,000, \$ 40,000, \$ 45,000, \$ 30,000, \$ 50,000 .$ Calculate
the share of total income each quintile of this income distribution received. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution for $2005 ?$

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator