Use the following information to work Problems 5 and 6. In a year, 130,000 aircraft mechanics and service technicians earned an average of $20 an hour whereas 30,000 elevator installers and repairers earned an average of$25 an hour. The skill and training for these two jobs are very similar.

Suppose that a government law required both groups of workers to be paid $22.50 an hour. Draw a graph to illustrate what would happen to the quantities employed of the two types of labor.

Economic inequality arises from all of the following except ________.

A. inequality of human capital

B. inequality of education attainment

C. a shortage of high-skilled labor

D. discrimination

Use Table 2 and the following information to work Problems 5 to 7. Suppose that the government redistributes income by taxing the 60 percent of households with the highest market incomes 10 percent, then distributing the tax collected as an equal benefit to the 40 percent with the lowest market income.

TABLE 2

Calculate the distribution of income after taxes and benefits and draw the Lorenz curve (i) before taxes and benefits and (ii) after taxes and benefits.

Use the following information to work Problems 5 and 6. In a year, 130,000 aircraft mechanics and service technicians earned an average of $20 an hour whereas 30,000 elevator installers and repairers earned an average of$25 an hour. The skill and training for these two jobs are very similar.

Draw the demand and supply curves for these two types of labor. What feature of your graph accounts for the differences in the two wage rates and what feature accounts for the differences in the quantities employed of these two types of labor?

Why do economists think that discrimination in the labor market is an unlikely explanation for the persistent inequality in earnings between women and men and among the races?

Suppose the cost of acquiring a skill increases and the value of marginal product of skill increases. Draw demand-supply graphs of the labor markets for high-skilled and low-skilled labor to explain what happens to the equilibrium wage rate of low-skilled labor, the equilibrium wage rate of highskilled labor, and the number of high-skilled workers employed.

Of all the Americans who live in poverty, most are ________ families, while the highest poverty rate is among ________ families.

A. black; Hispanic

B. black; white

C. white; black and Hispanic

D. Hispanic; white

TABLE 2

Table 2 shows the distribution of prize money among the top 20 professional golfers. Calculate the cumulative distribution of income of these golfers and draw the prize money Lorenz curve of these golfers. Which distribution is more unequal: the distribu

In recent years, as the gap between the rich and the poor has increased, the Lorenz curve has ________.

A. shifted away from the line of equality

B. not changed, but there has been a movement down along it

C. shifted closer to the line of equality

D. not changed, but there has been a movement up along it

Figure 1 shows the market for low-skilled workers. With on-the-job training, low-skilled workers can become high-skilled workers. The value of marginal product of high-skilled workers at each employment level is twice the value of marginal product of low-skilled workers, but the cost of acquiring skill adds $2 an hour to the wage rate that will attract high-skilled labor. What is the equilibrium wage rate of low-skilled labor and the number of lowskilled workers employed? What is the equilibrium wage rate of high-skilled labor and the number of high-skilled workers employed?

China inequality among world’s worst China has one of the world’s highest levels of inequality. A Peking University report says the richest 1 percent own a third of the country’s wealth, and the poorest 25 percent own 1 percent of the country’s wealth.

Where is wealth more unequally distributed: China or the United States?

Which of the following statements is correct?

A. The closer the Lorenz curve is to the line of equality, the more unequal is the distribution of income.

B. The farther the Lorenz curve is from the line of equality, the more unequal is the distribution of income.

C. If the Lorenz curve crosses the line of equality the distribution of income is more unequal at high income levels than at low income levels.

D. The Lorenz curve for wealth is closer to the line of equality than the Lorenz curve for income

Table 1 shows the income share for each household quintile and the cumulative shares. Provide the values for A, B, C, D, and E.

Use the following information to work Problems 7 to 11. California: The nation’s most unequal state In California, researchers found, it really matters where you live. Residents of Silicon Valley live more than four years longer than the average American, earn nearly double the income, and have nearly triple the number of graduate degrees. Residents of Central Valley live nearly a year less than the average American, earn barely more than a poverty-line income, and nearly four in ten failed to graduate from high school.

Illustrate the labor markets for college graduates in Silicon Valley and high school graduates in Central Valley with a graph.