Average & Total Cost, Application of Economics & Income Inequality Mcqs - Set 8

1)   Differences in wages that result from differences in working conditions are known as ?

a. occupational differentials
b. search differentials
c. job differentials.
d. compensating differentials
Answer  Explanation 

ANSWER: compensating differentials

Explanation:
No explanation is available for this question!


2)   If the income effect is smaller than the substitution effect, higher net wages will ?

a. reduce the supply of labour.
b. increase the demand for labour
c. increase the supply of labour
d. have no effect on the supply of labour
Answer  Explanation 

ANSWER: increase the supply of labour

Explanation:
No explanation is available for this question!


3)   The substitution effect of higher wages suggests that as the wage rate increases ?

a. leisure becomes less expensive and households buy more of it
b. leisure becomes more expensive and households buy more of it
c. leisure becomes more expensive and households buy less of it
d. leisure becomes less expensive and households buy less of it.
Answer  Explanation 

ANSWER: leisure becomes more expensive and households buy less of it

Explanation:
No explanation is available for this question!


4)   The idea that the demand for car workers stems from the demand for cars is ?

a. output demand
b. indirect demand
c. derived demand
d. the value of the marginal product of auto workers.
Answer  Explanation 

ANSWER: derived demand

Explanation:
No explanation is available for this question!


5)   The poverty trap refers to ?

a. a situation in which those receiving state benefits may be almost no better off if they choose to work more to earn more income for themselves and the
b. a situation in which workers are unable to find jobs.
c. a situation in which those receiving state benefits may be almost no better off if they choose to work more to earn more because doing so will reduce
d. a situation in which those receiving state benefits are discriminated against by employers and so find it more difficult to find jobs.
Answer  Explanation 

ANSWER: a situation in which those receiving state benefits may be almost no better off if they choose to work more to earn more because doing so will reduce

Explanation:
No explanation is available for this question!


6)   Current anti-poverty programs discourage work because ?

a. benefits are reduced at such a high rate when recipients earn more income that there is little or no incentive to work once one is receiving benefits.
b. in order to be eligible for benefits a recipient cannot have a job
c. they make recipients more comfortable than most middle-class citizens.
d. anti-poverty programs attract naturally lazy people to begin with.
Answer  Explanation 

ANSWER: benefits are reduced at such a high rate when recipients earn more income that there is little or no incentive to work once one is receiving benefits.

Explanation:
No explanation is available for this question!


7)   Rawls’s miximin criterion does not mean that there should be redistribution so as to equalise everyone’s incomes in society because ?

a. Such redistribution would mean that those who worked hard were no better off than those who were lazy and this would be unfair.
b. such redistribution would not maximize the total income of all members of society
c. Such redistribution would remove the incentive to work hard, so society’s total income would fall, and so the least well off person would be worse o
d. such redistribution would amount to confiscation of honestly earned income from higher earners and so would be unjust.
Answer  Explanation 

ANSWER: Such redistribution would remove the incentive to work hard, so society’s total income would fall, and so the least well off person would be worse o

Explanation:
No explanation is available for this question!


8)   Utilitarianism suggests that the government should choose policies that maximize the total utility of everyone in society by ?

a. redistributing income from rich to poor because this is what the members of society would choose to do if they were behind a veil of ignorance
b. redistributing income from rich to poor because due to the diminishing marginal utility of income, taking a pound from the rich reduces their utility
c. allowing each individual to maximize their own utility without interference from the government
d. redistributing income from rich to poor because this would maximize the well-being of the worst-off person in society
Answer  Explanation 

ANSWER: redistributing income from rich to poor because due to the diminishing marginal utility of income, taking a pound from the rich reduces their utility

Explanation:
No explanation is available for this question!


9)   The maximin criterion suggested by Rawls’s theory of justice means that the government should aim to ?

a. Maximize the total utility of society
b. Maximize the well-being of the worst-off person in society
c. minimize the difference between the rich and poor
d. maximize the economic freedom of individuals by minimizing government interference in private decision making
e. minimize the well-being of the best-off person in society
Answer  Explanation 

ANSWER: Maximize the well-being of the worst-off person in society

Explanation:
No explanation is available for this question!


10)   If people can borrow and lend to perfectly smooth out their lifetime living standards, then ?

a. transitory income is a good measure of the distribution of living standards
b. none of these answers
c. permanent income is a good measure of the distribution of living standards.
d. life-cycle income is a good measure of the distribution of living standards.
e. current annual income is a good measure of the distribution of living standards.
Answer  Explanation 

ANSWER: permanent income is a good measure of the distribution of living standards.

Explanation:
No explanation is available for this question!


11)   A period of unemployment due to recession will ?

a. increase a worker’s current income and permanent income
b. reduce a worker’s current income but not necessarily their permanent income
c. affect neither the current nor the permanent income of a worker
d. reduce a worker’s permanent income but not their current income
Answer  Explanation 

ANSWER: reduce a worker’s current income but not necessarily their permanent income

Explanation:
No explanation is available for this question!


12)   Because in-kind transfers are not accounted for in standard measures of income distribution the standard measures of income distribution ?

a. accurately represent the true inequality of living standards
b. understate the inequality of living standards
c. exaggerate the inequality of living standards
d. could exaggerate of understate the inequality of living standards depending on whether the transfers are goods or services.
Answer  Explanation 

ANSWER: exaggerate the inequality of living standards

Explanation:
No explanation is available for this question!