The Greater the Area Between the Lorenz Curve and the Diagonal

question 40

Multiple Choice

The greater the area between the Lorenz curve and the diagonal in the Lorenz curve diagram, the

• A)smaller is the Gini ratio and the greater is the degree of income inequality.
• B)larger is the Gini ratio and the greater is the degree of income inequality.
• C)smaller is the Gini ratio and the lesser is the degree of income inequality.
• D)larger is the Gini ratio and the lesser is the degree of income inequality.

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Definitions:

External Benefit

A positive effect or advantage that results from a product or service's use, affecting individuals or entities who are not directly involved in the transaction.

Positive Externality

A beneficial effect experienced by a third party or the society as a whole, resulting from an economic transaction.

Market

The environment in which buyers and sellers interact to exchange goods, services, and information, setting prices through supply and demand.

Socially Optimal Quantity

Socially Optimal Quantity is the level of production or consumption of a good or service that results in the maximum possible economic efficiency and welfare, taking into account all social costs and benefits.