In a Lorenz Curve Diagram, the Size of the Area

question 41

Multiple Choice

In a Lorenz curve diagram, the size of the area between the Lorenz curve and the diagonal line represents

• A) complete income equality.
• B) the percentage of income received by the top 5 percent of families.
• C) the percentage of income received by the bottom 20 percent of families.
• D) the dollar incomes of the bottom 40 percent of families.
• E) the degree of inequality in the distribution of income.

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Definitions:

Consolidated Net Income

The total profit of a corporation and its subsidiaries after taxes, interest, depreciation, and other expenses have been deducted, reflecting the overall earnings of the conglomerate.

Parent

A company that controls or owns more than half of another company's stock, thereby having control over its subsidiary.

Subsidiary

A company controlled by another company, referred to as the parent company, through ownership of more than half of its voting stock.

Impairment

The reduction in the recoverable value of a fixed asset or goodwill below its book value on the balance sheet, often leading to an expense in the income statement.