Suppose All Persons Have the Same Innate Ability and the Same

question 17

Multiple Choice

Suppose all persons have the same innate ability and the same access to capital markets. Which of the following will decrease inequality?

• A) People vary more in their time horizon.
• B) People vary more in the value they place on leisure.
• C) People become more willing to leave the labor force when their wages fall.
• D) People become more risk-adverse

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Definitions:

Utility Maximization

The process by which consumers allocate their income in a way that maximizes their overall satisfaction or utility.

Marginal-Utility Schedules

Tables or graphs showing the relationship between the quantity of a good consumed and the incremental satisfaction (utility) gained from consuming each additional unit.

Utility Maximization

An economic principle where consumers attempt to get the greatest satisfaction possible from their available resources.

Demand Schedule

A table of numbers showing the amounts of a good or service buyers are willing and able to purchase at various prices over a specified period of time.