Which Statement Describes the Paradox of Ordeal Mechanisms

question 25

Multiple Choice

Which statement describes the paradox of ordeal mechanisms?

• A) Welfare systems not only make the high-income individuals worse off,they reduce the well-being of low-income individuals in the long run.
• B) Making the receipt of welfare benefits less attractive and less generous may actually make the recipients better off.
• C) Low-income individuals are made worse off for having received welfare because of the corresponding reduction in self-worth.
• D) Welfare programs make the high-income individuals better off,even though they are the ones who are taxed to fund the welfare program.

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Definitions:

Unrealised Profit

Profit that has been earned but not yet received in cash or recorded in the financial statements, often resulting from intra-company transactions.

Mark-up

The amount added to the cost price of goods to cover overhead and profit, determining the selling price.

Deferred Tax Asset

Financial accounting that recognizes reduced income tax in the future due to deductible temporary differences and carryforwards.