1. When the actual Lorenz curve is as far away from the 45-degree line as possible, there is

perfect income equality.

perfect income inequality.

a more equal distribution of income than before.

a less equal distribution of income than before.

2. One way to reduce the degree of income inequality is to

increase transfer payments going to people with low labor and asset incomes and increase taxes on people with high labor and asset incomes.

decrease transfer payments going to people with low labor and asset incomes and decrease taxes on people with high labor and asset incomes.

increase transfer payments going to people with low labor and asset incomes by less than taxes are increased on the same people.

increase transfer payments going to people with high labor and asset incomes by more than taxes are increased on the same people.

a and c

3. Which of the following statements is true?

Some degree of income inequality is due to the fact that individuals are innately different and make different choices.

No income inequality is due to good or bad luck.

People who agree on the factors that cause income inequality may not agree on the importance of the different factors.

a and c

a, b, and c

4. The Gini coefficients for countries A and B are 0.25 and 0.30, respectively. We can definitely conclude that

the lowest 20 percent family income groups in A and B receive 25 percent and 30 percent of total income, respectively.

the lowest 50 percent family income groups in A and B receive 25 percent and 30 percent of total income, respectively.

the lowest 20 percent family income group receives a greater share of total income in country A than in country B.

the lowest 20 percent family income group receives a greater share of total income in country B than in country A.

none of the above

5. As a determinant of a person's income, luck is more important in the __________ run, as continuous reoccurrences of one kind of luck are __________.

short; likely

short; unlikely

long; likely

long; unlikely