The Following Diagram Shows Three Lorenz Curves for Countries A

question 32

Essay

The following diagram shows three Lorenz curves for countries A, B, and C. The area between the Lorenz curve and the diagonal is 1,000 for Country A, 2,000 for Country B, and 2,500 for Country C. (The entire area under the diagonal is 5,000 because the area of the triangle is ½ × (base × height) = ½ × (100 × 100) = 5,000.)
(1) Calculate the Gini coefficient for each country.
(2) Based on the Gini coefficient, which country has the most equal distribution of income? Which country has the least?

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Definitions:

Selling and Administrative

Expenses associated with the general operations of a business, including costs related to sales, marketing, and the management of the company.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold.