-The Table Above Shows the Distribution of Income in Swacko

question 155

Multiple Choice

-The table above shows the distribution of income in Swacko. The government of Swacko imposes a 20 percent tax on people with the highest 40 percent of income. The government then distributes 40 percent of the tax collected to the lowest 20 percent and 30 percent to the second 20 percent and the middle 20 percent. After the redistribution, the Lorenz curve for income

• A) is equal to the line of equality.
• B) equals the Lorenz curve for wealth.
• C) is closer to the line of equality.
• D) is above the line of equality.

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Definitions:

Market Price

The current market value at which an asset or service is up for sale or purchase.

External Benefits

Positive effects experienced by those not directly involved in an economic transaction.

Efficient Equilibrium

A state in which resources are allocated in the most efficient manner, leaving no potential for reallocating resources to make someone better off without making someone else worse off.

Government

A system or group of people governing an organized community, often a state, and set policies, laws, and regulations.