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Focused topic practice

income inequality MCQs

Practise focused income inequality questions with marked answers for exam preparation and subject revision.

income inequality Mcqs

1. In a competitive labour market firms will hire labour up to the point where the marginal revenue product of labour equals ?
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A. the price of the product

B. the marginal product

C. total labour cost

D. the wage rate

2. Housing Benefit is a good example of ?
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A. a benefit in kind

B. a means tested cash benefit

C. none of the above

D. a universal (social insurance based) benefit

3. The total amount of tax you pay divided by your total income is the ?
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A. average tax rate

B. proportional tax rate

C. total tax rate

D. marginal tax rate

4. An unemployed salesperson has been offered a job paying Rs500 a week. He turns that job down and continues to search for another job that pays more. The cost of this continued search is ?
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A. Rs difference between the weekly salary he finally accepts and the Rs500 weekly salary that he has forgone

B. The Rs500 weekly salary that he has forgone and the monetary costs incurred by continuing to search

C. the Rs500 weekly salary that he has forgone to search for another job

D. Rs0, since he is currently unemployed

5. If output price is constant, the marginal revenue product of labour curve will have the same shape as the ?
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A. total variable cost curve

B. marginal product of labour curve

C. total product of labour curve

D. marginal cost curve

6. An example of an indirect tax is ?
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A. VAT

B. inheritance tax

C. income tax

D. a tax on profits.

7. Current anti-poverty programs discourage work because ?
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A. anti-poverty programs attract naturally lazy people to begin with.

B. 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.

C. they make recipients more comfortable than most middle-class citizens.

D. in order to be eligible for benefits a recipient cannot have a job

8. If the income effect is smaller than the substitution effect, higher net wages will ?
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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

9. Permanent income is ?
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A. equal to the minimum wage

B. none of these answers

C. Social Security income of the elderly and disabled

D. wages fixed by a union or other labour contract

E. a persons normal or average income

10. Supply of land in a given use ?
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A. will be upward sloping because as land becomes more valuable in once use, the amount of land made available for that use will increase

B. will be perfectly inelastic in the long run. but upward sloping in the short run

C. is perfectly elastic since there is fixed amount of land

D. is perfectly inelastic since there is a fixed amount of land

11. A tax whose burden is the same proportion of income for all households is ?
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A. an equal tax

B. a regressive tax

C. a proportional tax

D. a progressive tax

12. New technology in the form of computer spreadsheets has increased the productivity of accountants. This will cause ?
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A. firms to move up their demand curves for accountants

B. firms to move down their demand curves for accountants

C. the demand curve for accountants to shift to the left, since it requires fewer accountants than it did before to do the same amount of work.

D. the demand curve for accountants to shift to the right, since the productivity of accountants has increased

13. Because peoples income vary other the life cycle and because there are transitory shocks to peoples incomes the standard measures of income distribution ?
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A. understate the inequality of living standards

B. exaggerate the inequality of living standards

C. could exaggerate or understate the inequality of living standards depending on whether the transitory shocks are positive or negative

D. accurately represent the true inequality of living standards

14. Tax incidence is the ?
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A. structure of the tax.

B. ultimate distribution of a taxs burden

C. behaviour of shifting the tax to another party

D. measure of the impact the tax has on employment and output

15. A tax whose burden expressed as a percentage of income, falls as income increases is a ?
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A. benefits received tax

B. progressive tax

C. regressive tax

D. proportional tax

16. VAT is a good example of which kind of tax ?
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A. Ad valorem

B. specific

C. Excise duty

D. Direct

17. Differences in wages that result from differences in working conditions are known as ?
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A. compensating differentials

B. occupational differentials

C. job differentials.

D. search differentials

18. Utilitarianism suggests that the government should choose policies that maximize the total utility of everyone in society by ?
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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 by less than the gain in utility generated by giving a pound to the poor

C. allowing each individual to maximize their own utility without interference from the government

D. istributing income from rich to poor because this would maximize the well-being of the worst-off person in society

19. Unemployment benefits may increase the unemployment rate because unemployment benefits ?
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A. encourage people to quit their jobs

B. reduce the cost of job search

C. reduce the benefits of additional job searching

D. enable people to quit searching for work

20. The substitution effect of higher wages suggests that as the wage rate increases ?
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A. leisure becomes less expensive and households buy less 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 more of it

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