In the Parable of the Leaky Bucket, a Fundamental Problem

question 97

Multiple Choice

In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,

• A)the costs of welfare programs will exceed the benefits.
• B)it should not try to reach complete equality in income.
• C)income equality will be the best policy option.
• D)equality of economic opportunity will reduce society's utility.

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Definitions:

Moral Hazard

The risk that one party to a transaction has the incentive to take undue risks because the cost will fall on the other party.

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An assessment given to candidates before employment to measure their typing speed and accuracy.

Moral Hazard

The situation where one party to an agreement can take on risk because they know the other party will bear the cost of that risk.