1) Which of the following is a reason why the employment of a resource is inversely related to its price?

a) As the price of a resource rises, producers will begin to use more expensive substitute resources.

b) As the price of a resource rises, producers seek to use more of that resource since they can charge a higher price for the goods the resources help produce.

c) As the price of a resource rises, producers will begin to use cheaper substitute resources.

d) As the price of a resource rises, producers seek to use more of that resource since a higher resource price signals higher quality.

4) Profit-maximizing firms will hire a resource only if they can make money by doing so.

a)True

b) False

4) In a market economy, each resource will tend to be paid according to its marginal revenue product. Highly productive resources will command low prices, whereas less productive resources will command higher prices.

a) True

b) False

10) Which of the following explain how wage differentials improve the efficiency of resource allocation?Check all that apply.

a) Wage differentials compensate people for unfavorable work conditions.

b) Wage differentials arising from labor unions allocate labor efficiently within an industry.

c) Wage differentials arising from racial discrimination allocate labor efficiently across jobs.

d) Wage differentials incentivize individuals to make investments in their human capital.

11) Which of the following is likely to be the largest source of earnings differences between an upper-story window washer and a ground-floor window washer?

a) Compensating wage differentials for dangerous working conditions

b) Tournament pay

c) A difference in years of experience

d) A difference in job location

13)Musashi works as a high school science teacher earning $40,000 per year. With his master's degree in chemistry, Musashi could earn three times as much money working in a laboratory, but he accepts the lower wage of a teacher because he enjoys the extra time it gives him to spend with his family and friends. This aspect of wage dispersion is best explained by which of the following?

a) Worker preferences

b) Compensating wage differentials

c) Tournament pay

d) Fringe benefits

2) Over the past few decades, income inequality in the United States, as measured by the relative share of total income earned by the top and bottom 20% of individuals, has increased.

Why has the income gap between the rich and the poor been widening in the United States over this time period?Check all that apply.

a) Workers with little education who are willing to work in undesirable conditions (such as hot weather) now receive higher wages.

b) Marginal tax rates are dramatically lower than during the 1970s.

c) The United States is more attractive than other countries to high-skilled workers.

1) Suppose you have annual total income data for a country, with the population divided into quintiles by money income.

Why is this data measurenota good reflection of the degree of income inequality in a country?Check all that apply.

a) Total income data for a country show only the distinction between the education levels of the income earners in the country.

b) Total income data for a country lump together people in different phases of their earnings life cycles.

c) Total income data for a country lump together people who have low wealth and high incomes and people who have high stocks of wealth and low incomes.

d) Total income data for a country show only the distinction between the incomes earned by families with multiple earners and families with single earners.

3) Income mobilitycan be defined as:

a) The change in relative income positions of individuals and families over time

b) The changing total income levels of a country at different points in time

c) The ability of some people to stay at the top of the income distribution year after year

d) The movement of individuals and families from low-income areas to high-income areas

4) Does a $1,000 transfer payment necessarily increase the income of poor recipients by $1,000?Check all that apply.

a) No, because the marginal tax rate will be lower, so the individual's income will actually increase by more than $1,000.

b) No, because there are disincentive effects of higher marginal tax rates.

c) Yes, because the individual is able to purchase $1,000 worth of goods and services.

d) Yes, because the individual will be able to spend the entire $1,000 transfer payment.

6) Antipoverty programs have often been criticized for not being effective enough.

Which of the following represents an unintended secondary effect of antipoverty transfers?

a) Increased charity efforts by private organizations

b) Reduced crime in society

c) The Samaritan's Dilemma

d) High incentives to increase work, in spite of the higher marginal tax rates

7) During the last two decades, there has been an increase in income inequality in the United States.

Which of the following is a reason income inequality in the United States has increased?

a) Marginal tax rates have increased significantly since the 1970s.

b) There has been a significant drop in the number of single-parent families.

c) There is an increasing proportion of the population that consists of single-parent and dual-earner families.

d) There has been a great increase in the efficiency of government antipoverty programs.

8) Consider the concept of means-tested income transfers.

Which of the following is correct regarding these income transfers?

a) Means-tested programs include food stamp programs, housing benefits, and Medicaid programs.

b) Means-tested government programs have been highly effective in the fight against poverty in the United States.

c) Means-tested government programs do not include housing benefit programs.

d) Means-tested income transfers have more than doubled per-capita income in the last three decades.

9) As income transfer programs accompanying the War on Poverty increased beginning in the latter half of the 1960s, what happened to poverty in the United States?Check all that apply.

a) In 2014, the adjusted poverty rate was only 2 percentage points lower than the official rate in 1970.

b) The poverty rate in the United States declined substantially after the start of the War on Poverty.

c) The adjusted poverty rate has declined rapidly and is now less than half of the official poverty rate.

d) The poverty rate declined substantially in the periodbeforethe War on Poverty, but not in the periodafterthe start of the War on Poverty.

10) Consider the following scenario in the state of Sunnytopia.

One family has an annual income of $100,000, while another family has an annual income of only $20,000. Under what circumstances would this outcome be considered unfair in terms of the process view of fairness?

a) The family with the higher income is headed by a person who completed a college degree, whereas the other family is headed by someone with low educational achievement.

b) The family with the high income has three income earners, whereas the family with the lower income has only one income earner.

c) The family with the higher income derives most of its income from the farm subsidy program.

d) In the family with the high income, both spouses work, whereas the family with the lower income relies on Social Security payments.