Income Inequality – MCQs

52 questions. Click to practice.

Show Answers

Correct options are highlighted when revealed.

1.According to Rawls, the principle that policies should aim to improve the situation of the least advantaged individuals in society is based on which concept?

The belief that policy decisions should be made without knowledge of one's social status, combined with the view that government intervention is unnecessary if theft does not occur.The notion that individuals should design policies from behind a veil of ignorance regarding their social position, leading them to prioritize protecting those who might end up with the lowest income.The idea that policies should be formulated from a position of ignorance about social circumstances, with a focus on caring for uninformed individuals.The principle that income should be distributed equally among all members of society.The concept that government should only intervene to correct market failures without considering income distribution.

2.Arrange the following political philosophies—utilitarianism, liberalism, and libertarianism—in order from the one advocating the least income redistribution to the one supporting the most.

utilitarianism, liberalism, libertarianismEach philosophy supports a comparable level of income redistributionliberalism, libertarianism, utilitarianismlibertarianism, liberalism, utilitarianismlibertarianism, utilitarianism, liberalism

3.Mariam has a higher income than Seamus, and she obtained her earnings justly and honestly. Which political philosophy would oppose redistributing income from Mariam to Seamus?

4.How do standard income distribution measures reflect living standard inequality, given that individuals' incomes fluctuate over their lifetime and are affected by temporary income shocks?

They tend to overstate the disparity in living standards.They may either overstate or understate living standard inequality based on whether temporary income changes are positive or negative.They tend to underrepresent the differences in living standards.They provide an accurate depiction of actual living standard inequality.

5.What is meant by permanent income?

Income received from Social Security for seniors and disabled individualsNone of the provided choicesSalaries determined by labor unions or collective agreementsThe legally mandated minimum wageAn individual's typical or average earnings

6.In Pakistan, what does the term 'poverty trap' refer to?

Individuals with low income are often left out of social and recreational events.The welfare system in Pakistan causes poverty to be a humiliating experience.When poor individuals increase their earnings, their benefits decrease, leaving them no better financially.Low-income people in Pakistan face excessive taxation.

7.Which category best describes Housing Benefit?

A cash benefit subject to means testingA universal benefit based on social insuranceA non-cash benefit provided in kindNone of the listed options

8.Which of the following is considered an indirect tax?

9.What does tax shifting refer to?

It describes the design or framework of a tax system.It happens when individuals change their actions to evade paying taxes.It takes place when taxes lead to higher prices but lower wages.It signifies how the burden of a tax is ultimately shared among people.

10.Which type of tax decreases as a percentage of income when a person's income rises?

Tax based on benefits receivedTax that increases with higher incomeTax rate that declines as income growsTax that remains constant as a percentage of income

11.What type of tax requires every household to pay the same percentage of their income?

12.What term describes the ratio of the total tax paid to your overall income?

mean tax percentageincremental tax rateflat tax rateoverall tax rate

13.What principle does horizontal equity uphold in taxation?

Individuals with the same capacity to pay should face different tax obligations.Those who gain the most from public services ought to pay higher taxes.People benefiting the most from government programs should have greater influence over production decisions.People with equal ability to pay are expected to carry equal tax responsibilities.

14.What does a Gini coefficient value of one signify?

The highest 20% earn all the income in the population.Income is shared evenly among everyone.Income is divided equally between the top 20% and the remaining 80%.A single household possesses all the income, while everyone else has none.

15.What does the Gini coefficient represent?

The ratio comparing the share of total income earned by the richest 20% of households to that earned by the poorest 20%The most frequently used graphical method to display income distributionA popular metric used to quantify income inequality levelsA standard indicator measuring the extent of unfairness in income allocation

16.In economic terms, what does the word 'rent' signify?

The income received from a production factor that has a fixed quantityThe earnings gained by the proprietor of a residential propertyThe yearly payment made by a renter for living spaceThe gains obtained by shareholders when they dispose of their shares

17.When labor market discrimination limits women to fewer job types, thereby increasing the variety of occupations available to men, what is the likely effect on men's wages and marginal productivity?

Men's earnings will rise, but their marginal productivity will decline compared to the alternative scenario.Men will earn less, yet their marginal productivity will increase relative to what it would have been otherwise.Both men's wages and marginal productivity will decrease compared to the situation without discrimination.Men will experience higher wages along with increased marginal productivity than they would have otherwise.There will be no change in men's wages or marginal productivity.

18.A salesperson without a job is offered a position that pays Rs500 per week but declines it, opting to keep looking for a higher-paying job. What represents the cost of continuing the job search?

The Rs500 weekly income he gave up by rejecting the jobBoth the Rs500 weekly income he sacrificed and any additional expenses related to the ongoing job huntThe difference between the salary of the new job he eventually accepts and the Rs500 he turned downZero, because he currently has no employmentThe total amount of money he expects to earn from future jobs

19.What is the correct formula for calculating the marginal revenue product of labor, where L represents labor and X denotes the product?

Sum of MPL and PXProduct of MPL and PXPX divided by MPLMPL divided by PX

20.In a competitive labor market, up to which point do firms continue to employ workers based on the marginal revenue product of labor?

the overall expense of laborthe additional output produced by one more workerthe selling price of the goodthe hourly wage paid to workers